Price The Direct Link to Your Bottom Line
Price The Direct Link to Your Bottom Line
Set a Pricing Strategy
Start by setting pricing and profit margin goals. What is your target profit margin given your expenses? Determine if you are competing on price or quality. You cannot do both, because quality suffers when prices are lowered. If you are determined to be a low-cost leader, then efficiency in your operations is critical. On the other hand, if you are selling quality, then do not compromise on price. Discounts are a good strategy if you are a low-cost leader, but not when selling quality. Do not wing it. Use smart analytical tools to set proper pricing. Pricing correctly should not be based on intuition. Put in place a specific pricing strategy based on the perceived value offered to your target market. Do not make assumptions and be prepared to research and test alternatives.
Maximize Profits
Your pricing structure should maximize profits. The price should be set so that profits are maximized based on the given demand relative to price. It is not uncommon for prices to be too low given demand. This results in lower profits. If prices are too high, not enough units may be sold, as buyers are turned away. The key is to price correctly so units sold and profits are maximized, given demand. Does your pricing structure maximize or impede your sales revenues? Find the happy medium and profits are maximized.
Do Pricing Homework
Review your expense budget and price your products and services accordingly. In determining a budget, keep in mind fixed and variable expenses. Review marketing expenses and how those are built into your pricing structure and marketing plan. Advertising, sales commissions, direct mail and other promotional activities are expensive and directly impact your pricing strategy. Review your competitors' pricing and attempt to determine their profit margin. Many businesses have very thin profit margins and others rely on debt. Have a clear plan for using debt wisely, or if you are fortunate enough, do not incur any debt.
Price to Gain a Competitive Edge
Make pricing a competitive advantage by providing more value than your competitors at relative prices. Research your competition and add value in a unique way that better meets the needs of your target market. Do this without increasing expenses tremendously and do what you do better than your competition. Price then becomes a non-issue in the short term.
Price to Meet Customer Needs
Get feedback from customers about your pricing. Customers are looking for fair pricing. People realize that they get what they pay for. The most important benefit is to receive a fair price for the value of the product or service. Price is equal to the relative value in the mind of the customer.
Prices are Being Driven Lower
Competition, excess inventories and the Internet are driving prices lower then ever before. Keep this in mind when setting your pricing strategy. We are all forced to do more with less. We have to compete smarter, focusing on customer service and knowledge-based services. In these areas, our expertise and our customer’s return on investment will determine a fair price.
Believe In Your Prices
For those of you in sales, keep in mind that you must believe 100% in the pricing of your product or service. Any doubt in this area will lead to customer objections on price and a loss of sales. Customers will sense your lack of confidence. Competition keeps pricing fair. Have confidence in your pricing strategy and communicate that assurance to your customers. Your price should equal the value you bring customers. Follow these guidelines and be prepared for improved profits.
Price The Direct Link to Your Bottom Line - To learn more about this author, visit Thomas Young's Website.
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Setting the correct pricing strategy for your products and services is a great challenge. Pricing has tremendous impact on your profits, because pricing not only determines the quantity sold, but also the direct contribution to your bottom line. Following are a few key points to consider when setting prices.
Set a Pricing Strategy
Start by setting pricing and profit margin goals. What is your target profit margin given your expenses? Determine if you are competing on price or quality. You cannot do both, because quality suffers when prices are lowered. If you are determined to be a low-cost leader, then efficiency in your operations is critical. On the other hand, if you are selling quality, then do not compromise on price. Discounts are a good strategy if you are a low-cost leader, but not when selling quality. Do not wing it. Use smart analytical tools to set proper pricing. Pricing correctly should not be based on intuition. Put in place a specific pricing strategy based on the perceived value offered to your target market. Do not make assumptions and be prepared to research and test alternatives.
Maximize Profits
Your pricing structure should maximize profits. The price should be set so that profits are maximized based on the given demand relative to price. It is not uncommon for prices to be too low given demand. This results in lower profits. If prices are too high, not enough units may be sold, as buyers are turned away. The key is to price correctly so units sold and profits are maximized, given demand. Does your pricing structure maximize or impede your sales revenues? Find the happy medium and profits are maximized.
Do Pricing Homework
Review your expense budget and price your products and services accordingly. In determining a budget, keep in mind fixed and variable expenses. Review marketing expenses and how those are built into your pricing structure and marketing plan. Advertising, sales commissions, direct mail and other promotional activities are expensive and directly impact your pricing strategy. Review your competitors' pricing and attempt to determine their profit margin. Many businesses have very thin profit margins and others rely on debt. Have a clear plan for using debt wisely, or if you are fortunate enough, do not incur any debt.
Price to Gain a Competitive Edge
Make pricing a competitive advantage by providing more value than your competitors at relative prices. Research your competition and add value in a unique way that better meets the needs of your target market. Do this without increasing expenses tremendously and do what you do better than your competition. Price then becomes a non-issue in the short term.
Price to Meet Customer Needs
Get feedback from customers about your pricing. Customers are looking for fair pricing. People realize that they get what they pay for. The most important benefit is to receive a fair price for the value of the product or service. Price is equal to the relative value in the mind of the customer.
Prices are Being Driven Lower
Competition, excess inventories and the Internet are driving prices lower then ever before. Keep this in mind when setting your pricing strategy. We are all forced to do more with less. We have to compete smarter, focusing on customer service and knowledge-based services. In these areas, our expertise and our customer’s return on investment will determine a fair price.
Believe In Your Prices
For those of you in sales, keep in mind that you must believe 100% in the pricing of your product or service. Any doubt in this area will lead to customer objections on price and a loss of sales. Customers will sense your lack of confidence. Competition keeps pricing fair. Have confidence in your pricing strategy and communicate that assurance to your customers. Your price should equal the value you bring customers. Follow these guidelines and be prepared for improved profits.
Price The Direct Link to Your Bottom Line - To learn more about this author, visit Thomas Young's Website.
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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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