Tweet

Eight Steps to Testing a New Pricing Strategy

Written by: John Brennan

Article Overview: Setting prices can be a process that is researched, objective and tested, or one that is reactive, emotional and impulsive. Follow the steps below and feel confident that your pricing strategy will be a success.

Eight Steps to Testing a New Pricing Strategy

1. Know your value proposition. If your pricing strategy and value proposition aren't aligned, you're contradicting yourself, confusing the market and limiting your opportunities.

2. Group your products/services into categories: Commodities, partially differentiated, substantially differentiated, custom. And remember that your opinion may be different than that of your target market - while you may view your products as "highly" differentiated, they may think "partially."

3. Evaluate your competition for each group of products. How do your prices compare to those of your competitors?

For many B2B companies, this step is easier said than done -- you're less likely to find specific pricing info for your competitors. If that's the case, you can try to "secret shop" your competitors, ask prospects for feedback or just estimate a range.

4. Talk to your sales reps. If they're very close to their prospects and customers, they may be able to provide solid estimates.

Give them a chart and ask them "If our price was X, how many incremental deals do you think you could have won (or lost)?" Provide 3-5 values for X.

5. Survey your lost prospects and customers. As in the previous step, you're trying to project the number of deals you could have won or lost at different price levels.

You can have your sales reps contact prospects and customers or you can use an independent third party or formal survey. Your goal is to find out whether they would have bought from you (or whether existing customers would buy more/less) at different price points.

6. Calculate your total estimated profit at each price point. First, calculate your total current profit at your existing price(s).

Units sold * (Price - Cost of Goods Sold) = Total current profit

Then look at your surveys and estimates and calculate the number of additional units you could sell (or lose) over the same time period.

(Existing units sold + incremental units sold) * (New price - Cost of Goods Sold) = Total projected profit

7. Test your theory. If possible, before you implement a company-wide pricing change, set up a statistically valid test to evaluate your new pricing.

8. Develop a communication plan. If you're raising prices, your sales reps and materials will need to easily overcome any objections they face. Consider giving existing prospects a window of time to buy at the current price. And if you are lowering prices, it's a great time to plan a major campaign to announce your news.

To learn how Interpersonal Development can assist with this or other marketing issues call John Brennan at 1-585-230-5765

Related Articles
  Pricing Your Products and Services for Ultimate Growth
  Functional Testing in Software Development
  How To Consistently Improve Your Web Site Results
  Consider Randomized, Real Time Testing
  Testing Your Way to Website Profits

Article Tags: pricing strategy



Related Forum Posts
Book: Secrets of Six Figure Women - Secrets of Six Figure Women: Surprising Strategies to up your earning and change your life Barbara Stanny, 2002 Jacket: Maybe you've noticed - a subtle trend is gathering steam. Quietly and steadily, the number of women making six figures or more is increasing, and it continues to rise at a rate faster than for men. From entrepreneurs to corporate executives, from white collar executives to free lancers and part timers, women are forging careers with considerable financial success. Through extensive research and hundreds of interviews, including dialogs with more than 150 high earners whose annual incomes range from $100,000 to 7 million, Stanny discovered that ...they all had certain traits in common: 1) a profit motive 2) Audacity 3) REslience 4) Encouragement 5) Self-awareness 6) Non-attachment 7) Financial knowhow She amplifies on these in the book itself. Table of Contents Intro: Welcome to the era of the six-figure woman 1. The Queen in the Countinghouse 2. The Lowdown on low earners 3. Raising the bar 4. Strategy 1: The Declaration of Intention 5. Strategy 2: Letting go of the ledge 6. Strategy 3: Get in the Game 7. Strategy 4: Speak Up 8. Strategy 5: The Stretch 9. Strategy 6: Seek Support 10. Strategy 7: Obey the rules of money 11. Claiming our power Appendces: Resources and websites Tips for getting out of dent Investing Basics: Wealthbuilding 101
Re: All the Secrets to Getting a Lot of Traffic Using Google AdW - Thanks, Zeke. Testing is required for any campaign. Tanny, let us know how you make out. I will try to get started with MSN during the next week. I have a bit to learn yet as it's different than Adwords. Alan
Re: THE Most Important Concern At Startup - That's true brokemet. Following through, implementing and testing your ideas is so important. Too many times people fall in love with their initial idea and myself included, will get stubborn with them. Testing is the only way of really finding out what works and what doesn't.
Re: What can you do if your franchise is hit by a scandal? - GT - Brilliant Strategy... What can I add? I'm at a loss for words...so I'll shut up now...
Re: The Importance of Testing - Even the fact that you outsource your business opportunities, you already are testing different firms there. Testing has already been part of every business even if some aren't recognizing it at all since they're already certain to go through a fixed goal to focus on. For me, trial and error can really take a lot of time although seeing the results and evaluating them will also help everyone to make it easier to start it right in the future and prevent wasting any.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Work at Home Moms and Their Bad Rap?

A New Year in the Pharmaceutical Industry

How To Be A Management Legend

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.