Freemium price optimization
If you give generously your business will be blessed. This isn't mysticism or spirituality. It's good business. Why? Let's look at it more closely. http://ift.tt/2jiocjw3 Reasons $0.00 so powerful I think there are three strong reasons why free is a powerful price. Risk Transfer.If you're a prospective customer, and you wonder whether a new business is going to treat you right, you have a lot to worry about. Let's be honest - it's a big risk.As a potential buyer you risk, * Wasting your time on a bad solution * Wasting your money * Identity theft * Tons of frustration and hassle We've all taken a risk on a new company and been burned. That stinks. When you give customers something for free you take away most of that risk. GenerosityWhen you give something for free you show yourself as generous. Customers have one radio station they listen to, WIIFM What's-In-It-For-Me. You want to broadcast loudly on that station. You want to show them that in the "who is going to win" equation - the answer is going to be them, not you.Most businesses aren't generous and don't let customers win very much. But the more you can structure your business to give the customer the upper hand, the better you'll do. Liberty Jane Clothing is from Seattle, and as you might guess, the legend of Nordstrom customer service is always top of mind for us. The return policy is simple - if you want your money back - they'll give it to you. The most powerful Nordstrom story comes from one of their Alaska stores. Here is what happened... A man walked in carrying two snow tires. He set them up on the counter and asked the clerk for a refund. Even though the clerk had only worked there for two weeks he knew two things:
That one story, and the $145 refund, has boosted Nordstrom's brand for the last 35 years. It's a powerful example of the company's fearless commitment to customer happiness. When Nordstrom lets you use and then return items, it is in effect, giving you the use of items for free. It is also showing an extreme amount of generosity. ConfidenceYou show yourself as confident in your business when you give something away for free. Most products and services are average. Most people don't launch high-quality, top-rated, awe-inspiring products. They put out an average product and hope that people won't ask for a refund if they're not happy. If you give away your product, in the form of samples, or offer generous return policies, you show everyone that you're confident your product is going to make the customer happy.How To Give Away TonsSo how do you actually give generously in your business and leverage the power of $0.00? Let's look at eight ways that might work for you. Samples If you can give your customers a sample, then they get to try before they buy. That small gift allows them to make a decision without making an investment. It is a fantastic pre-sell methodology. There is a reason Costco does it. Contests One way to give away a copy of your product for free is to run a simple contest. While only one person gets the copy, dozens, hundreds, or even thousands get engaged in the process. A comment contest on your blog, for example, offers the opportunity for your customers to share in the fun of participating, and support your brand. Giveaways A giveaway, similar to a contest, allows prospects to engage with your brand with no commitment. Guarantees A guarantee can be a powerful statement to your prospective customers. When we started on eBay the standard guarantee language was, "all sales are final". Instead of that, we decided to offer the most generous guarantee we could. Here is what we say, "We guarantee you'll be thrilled with these cute clothes, (everyone always is)! Our exceptional rating is important to us and we want everyone to have a great experience with Liberty Jane Clothing. We know you'll love it, but if you're unhappy with this outfit for any reason we will be happy to refund your purchase price, not including any shipping charges. There is nothing to loose." How-to Videos When you take the time to offer practical instructions or advice in the form of an instructional guidebook, or video, you're creating free content that has incredible value to your customers. You're also boldly stating to your prospective customers that you're committed to their success with the product. Tutorials Similar to a how-to, a tutorial gives prospective customers a free lesson. Tutoring or coaching is a commitment of time and energy in support of the customer's goals. Bonus Gifts Customers love a bonus gift. When you can create your product suite so that the customer gets extra value when they buy from you - you're demonstrating your generosity. Information Products The most incredible part of information products is that they can be given away for free - in unlimited quantities. Whereas with a contest you're limited by the costs involved in the item you're giving away, with an information product you can be incredibly generous. For all these reasons, and more, spend the time to consider how your business can leverage the power of the free item. Price optimization actionMake a list of the ways you currently offer free items. Brainstorm new ways to demonstrate your commitment to the customer's success.via Blogger http://ift.tt/2jitJXv January 29, 2017 at 02:46PM
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Differentiation: Premium pricing strategy
Differentiation is the most critical issue when it comes to brand building and pricing power. You maximize your penetration pricing strategy by offering something unique. Over time you maintain pricing power by creating a brand that stands out as unique in the mind of the customer. They pay more because of the uniqueness. http://ift.tt/2jihF8LYou know you're different when people tell you that you are. If people never tell you you're different, then you're not different enough. Your brand is the embodiment of your unique ideals. Marketers call that a Unique Selling Proposition, or a USP. You need one, and is one of the most potent pricing Strategies in marketing. Having a USP that customers understand and respect gives you a powerful brand in the minds of customers, and that creates their willingness to pay a premium price. Did I mention you need a USP? Since 2008 our USP at Liberty Jane has been, In other words we want to offer our customers original designs that are rare and beautiful. For six years we’ve worked to prove we can achieve this goal. We've also continuously tried to underscore and expand on that simple promise. For example, when we had the opportunity to hire Karen Pascho after a thirteen-year career as a Senior Designer at Nordstrom Product Group, we knew it would help fulfill our USP. A year later, when we had the chance to hire Melinda Schlimmer, the creator of the Melody Valerie Couture clothing line, we realized the same thing. Hiring these talented designers helped us reinforce our USP. The reason our business has pricing power is because we have customers that believe in our USP and business is aligned with pricing. They believe we can continuously offer them new and interesting designs. Our pricing power exists because of our USP. And the #1 attribute of a commodity is that it is not unique. The second attribute of a commodity is that the only thing that can possibly be unique is the purchase price. Therefore, people use the price to compete. You don’t want to be in that space not in the doll clothing marketplace or any other type of product or service. You need a Unique Selling Proposition so that you can compete on something other than price war. That means prospective customers don’t care whom they buy from in a commodity market. When that happens – pricing power vanishes. But something always seems to happen, even in highly commoditized markets – customers begin to bond with the most unique brands. They find the brands that meet their ideals and energize their thinking. Customers go looking for a USP that they can believe in. The USP gives people a reason to pay a higher price. People are willing to pay a higher price if you give them a good reason. That reason is generally tied to how your product is unique. The more unique customers believe your brand to be, the stronger your pricing power. We regularly hear people tell us that our work has “changed the market”. That's another indicator, (expressed by our customers), that we're meeting our USP. How do you become more unique?Step one: focus on how you are different - not how you are the same as your competition. Identify the differentiators. Make a list of the common descriptive statements in your niche or industry and promise to avoid them. Want to hear the most over-used phrase in the history of doll clothes selling? "I've been sewing for 40 years" Everyone uses that phrase. The problem is - that phrase is not original, unique, or memorable. It's an attempt at creating credibility, but it doesn't work too well for that purpose. Mainly because doing anything for a long time and doing it well are two different things. As a doll clothes seller you'd be much better off saying, "I've been sewing for forty years - with one hand - the other hand was lost in a bad accident involving a Grizzly Bear " Okay, I'm totally joking. But you get the idea. You want an original statement, not a "me-too" statement. Sometimes people think that a USP starts with a big accomplishment that you brag about. But it doesn't. A USP starts with an accomplishment that is unique and memorable. It needs to be something that sets you apart. Donald Trump wisely said, "Great brands are built by great deeds". While that is certainly true, great brands are frequently remembered and talked about because of unique or memorable attributes. Find your unique attribute. Step two: A USP is developed and reinforced through powerful storytelling and ongoing actions. To borrow a phrase from noted theologian Eugene Peterson, "It's a long obedience in the same direction" You should use your "about me" type pages to fully craft your USP and you should frequently refer people to it. You should constantly be doing things that align with and strengthen your USP. People will comment on a USP if they like it. They will talk to you about it and ask questions. It will produce an enthusiastic response. The Beauty Of A USPSome small business owners live in a world of scarcity thinking. If they see a competitor doing well they will say, "That opportunity is lost - I better give up". Other people realize the truth - there are as many opportunities to be unique as there are stars in the sky. The marketplace is begging for unique and memorable brands. Buyers are hunting for unique sellers. They clearly reject the commodity type sellers and seek out the unique brands. People want something to believe in. If you have a USP clearly crafted let it shine, let it shine, let it shine. If you don't have a clear USP, then you are selling a commodity, and you will only get commodity pricing. If you have a USP in your mind, but the marketplace isn't reflecting back to you that they understand it, then you have work to do on your branding. Work to clarify and reinforce the USP. When your customers start to express to you that they understand and appreciate your USP, then you'll know you're doing well standing out and being unique. Pricing power quickly follows. Premium pricing strategy action stepsCreate and polish your USP. Your USP is your secret weapon for pricing power. If customers respect your USP you will have strategic pricing power. via Blogger http://ift.tt/2jilMl7 January 29, 2017 at 01:36PM
Indulging in penetration pricing strategy
Prices are never absolute, and rarely ever stable. There is no "right price" for your product. http://ift.tt/2kfHANLPeople are sensitive to different pricing strategies in relation to what's "baked in" to their minds. They have a number in their head, and if your offer price is within reason, they'll agree to buy. According to noted researcher Ernst Weber it is the relative percentage of change that people notice, not the absolute amount. So people grow comfortable with a certain range of prices over time. They develop a "range" of "okay" deep in their gut. If your price falls inside that range then the purchase decision is easy. Fall outside that range, and the customer gets emotionally uncomfortable. If you've encountered a "90% off sale" on your favorite product, then you know the emotions involved bliss, greed, and a panic to snatch up as much as you can afford! Likewise, if you see your favorite product skyrocket in price, you know the emotions involved - anger, frustration, and even rage. If you appreciate a product, such as art or a collectible, and you observe the prices skyrocket, you frequently have the feeling of "awe". As in, you can't believe it's happening, but you're energized to see how it will play out. Anticipating The DiscountPeople also grow accustomed to prices trending either up or down. Either is accepted, as people grow accustomed to paying what needs to be paid to get a specific product or service. Many customers learn to anticipate the inevitable discounts that will occur in association with some products. Customers are smart and when they can't afford something they either look for a cheaper alternative, or they wait until they can get the item at a discount. Can't afford the eighty-inch TV at Costco? Just wait a year or two and it will be less than half the current price. Don't want to pay full retail for a new prescription drug? Just wait, (if you can), until they release a generic version. Want an awesome new car, but need a 30% discount? Wait for two years and buy it used. Many industries have these anticipated future discount characteristics. Those are hard industries to be in. There is constant pressure to lower your prices. If you're in an industry like that - my only advice is - maybe you should look for greener pastures. Anticipating The IncreaseBut there are other industries where customers know that prices trend up and not down. My first car was a 1968 Chevelle Malibu. Man I loved that thing. I still regret getting rid of it. My brother gave it to me for free and helped me get it running. Imagine my surprise a few years ago when I started seeing muscle cars sell at auction for increasingly high prices. $10,000? $20,000? $30,000? Lets have a look at the pricing strategies in marketing applied by marketers. The smart marketers at the Barrett-Jackson collector car auction in Scottsdale Arizona have done a lot to impact the price of collector muscle cars. Their auctions are huge events, regularly televised, and they create powerful new "normal prices" for these cars. They've created the expectation that collectible hot rods quickly appreciate in value. Last year they sold a 1968 Chevelle Malibu. Admittedly it was much nicer than mine ever was, but it sold for $61,600. Wow. Guess which way I expect prices of my old car to keep going? Up. There are special markets that have built in anticipation related to price increases. You're much better off operating in one of those markets than you are in a market that has the downward trends. Collector items frequently have this characteristic. Real Estate, (in some regions of the country), have this characteristic, and there are others. Hopefully your niche or industry has this characteristic. It's IncrementalEven in industries that have prices that trend up, it happens incrementally. People's willingness to pay is stretched slowly over time. If, for example, you're American Girl, and each January you sell your new Girl Of The Year doll for $105, then one year you change it to $120, as American Girl recently did, only the prior customers notice. New customers wouldn't know any different - and if you're paying $105 for a doll - what's another $15 bucks? These incremental increases tend to work in niches that have the upward pricing trends. But of course, the repeat buyers, who purchase the new Girl Of The Year doll each year, will notice the difference and be less than thrilled. If you're not familiar with the doll collector market, and you have a negative emotional reaction to hearing that the price of a doll is $120, it's probably because you have a lower price "baked into your brain". But that's only your reality. Other people think $105 is fine. Now many will think $120 is fine. You might say, "No - other people agree with me - this is an outrage." And that's fine, but enough other people don't, that it's still good business. As a buyer, you adapt, or you find an alternative that is within your comfort zone. My brother from California always asks me, "How much is gas in Seattle" every time we chat. He is intrigued by the difference. He has a price "baked in" that makes sense for him - but he knows distant markets have different realities. The Best Secret of penetration pricing strategyThe Internet is a giant place, which despite what you might think - has many funny pit stops, tourist destinations, backwoods, and odd shopping destinations that people become familiarized with. In these locations people's "mental measure" of what is right gets established. People form mental habits and opinions based on their activities on these locations. If you can create your own anchors you'll almost always have strategic pricing power. And you can create your own anchors. When you learn to do things like pre-selling, event management, auctions, and related promotional activities you'll be well on your way. Create your own anchors and you'll have a good shot of establishing a stable price point that people will honor. As a seller you want to avoid setting up shop in the online equivalent of Zimbabwe. Places where prices are spiraling down to zero. You won't control the anchors in those places; therefore you shouldn't be there. If you see aggressive price wars in the online places you sell, then pull up your tent stakes. Most importantly you want to sell in places that give you stable pricing potential, long-term pricing power, and stability by having anchors that are favorable. Places where customers grow accustomed to a consistent price. You might have a hint of reservation about all of this retail pricing strategies work. Maybe even begin to think it's somehow unfair to the customer. But this isn't about being unfair to customers. It isn't about trying to take advantage of people, or being unkind to customers. It's about selling items at a price your business can survive on, by aligning pricing with marketing and business. If your customers know, like and trust you, then they want you to be around for a long time. Customers know there is no perfect price and expect you to sell your items at a price that ensures your business survival. They want a bargain, but they also want their favorite brands to prosper. This is about your ability to serve your customers well into the future. Since there is no perfect price you want to strive for stable, consistent, and fair pricing over the long-term. Penetration pricing strategy action stepsExamine the anchors in your marketplace and consider how they impact your customers expectations related to prices and the trend of prices. Do you have anchors that help establish your pricing strategy? Are you in a volatile marketplace online that is losing pricing power? Consider your long-term selling location online and how to ensure it becomes your "castle with an unbreachable moat". via Blogger http://ift.tt/2kGxPor January 29, 2017 at 01:19PM
Applying different pricing strategies
I'm trying to remember how I learned about prices and the value of things. Do you remember how you learned about those topics? https://2.bp.blogspot.com/-Rwr0cWjKVAM/WIw0Pcp31EI/AAAAAAAAAqU/izcNxUPXyEMHseTqnqQYjH82xzfnlSV8gCLcB/s400/different%2Bpricing%2Bstrategies.pngI was a kid in the 70's, then a teenager in the 1980's. That's a long time ago now. I still remember the ritual prior to Christmas. We would get a Sears & Roebuck catalog and circle the things we'd hope to get. Then talk to mom & dad about our choices. We weren't alone. Kids have done it since the 1890's. "No Jason - you cannot have a canoe for Christmas - that's too expensive, besides, you're only six - and we don't live by a lake." "What about a riding lawn-mower?" "No" Remember those days? Somewhere in our childhood we get an understanding of what things should cost, what we can afford, and what range of spending we can comfortably operate in. It gets baked into our brain - like a permanent record of what's possible - and what's okay and not okay. For me, I think that happened each Christmas when I'd ask for things - and I would either get shot down, or get the more positive response, "Okay, we'll see about that". When I was a kid we knew our birthday gifts needed to be about $20. Ask for something more expensive than that and you were running the risk of having mom actually come up with her own idea for your gift, which of course was under $20. Fast-forward to today - and that amount seems like a cruel punishment for my kids. Talk about a mutiny, (when I jokingly suggest it). They just have a different range baked into their brain. We each perceive the "expensiveness" or "inexpensiveness" of an item depending on our context. So prices are relative - the same price can be expensive for some people, but inexpensive for others. I'll never forget the Thanksgiving when my in-laws came to visit us in Seattle, (Auburn actually), from San Francisco, (Petaluma actually). We were bored one morning, and the weather was nice, so we took them for a walk around our new neighborhood. We had just moved into a very large master-planned community full of nice big houses. Ours was modest, but down the street there were mcmansions. What did we stumble upon? The model homes. So we went inside, just to look at the paint, carpet, and furnishings. Model homes are always so fun to gawk at. As we strolled through the kitchen area of one of the mcmansions my mother-in-law picked up one of the pricing sheets that list the number of houses available and the specific price of each one. Her eyes bugged out of her head. "What?" - she (almost) screamed! As it turned out they could sell their 1,100 square foot home, which happened to be 40 years old, and get one three times bigger at half the price. Done deal. 14 years later they are still happily in their dream house. We're blessed to have them right down the street. Tons of Californians have done this over the decades. They take advantage of the relative price differences of housing in different markets. Context Creates AnchorsWhat's the point of our little trip down memory lane? It's simply this - the reason relative prices impact us is because our minds create what is known as an anchor. Anchors are formed by the memory of a prior price or simply knowing about the price of a related item. The anchor amounts are what is "baked in". Imagine for example, that you live your entire childhood in the one-square block in San Francisco known as Union Square. Maybe you have a condo above one of the stores or live in the Hilton hotel. Here is your reality - On one corner you've got Neiman Marcus, which in-case you haven't been in it - is a 4 story, (as I recall), department store loaded with the most expensive boutique brands in the world. On another corner you've got the largest Macy's most people have ever seen. Then there's Saks Fifth Avenue across the square - and of course the Tiffany's Jewelers. In the middle is a nice plaza with ice-skating in the winter. (Side note - if you're ever there, go to Britex Fabrics. It is Cinnamon's favorite place on the planet). Imagine you live your whole life growing up there, never visiting anywhere else. Now imagine you fall madly in love with a tourist from Zimbabwe and move to the capital city of Harare. [I truly mean no disrespect to the country or wonderful people of Zimbabwe.] In Zimbabwe they print One Hundred Trillion dollar bills, (I'm not joking), because the Trillion dollar bills were apparently too hard to carry around, (in large wads that would fill your pockets). Apparently they became useless, so the country started going with the One Hundred Trillion notes instead. Not long ago, when I was in Zimbabwe in 2009, a cashier tried to give me change in U.S. Dollars. I asked if I could get change in Zimbabwean currency, (as a souvenir). He said, "How much do you want?" I said, "Do you have any of the new Trillion dollar bills?" He said, "No, people keep asking me for them. I'm out, but I've got Billions." I said, "How much will $2 U.S. dollars get me?" He said, "It's not worth anything, so just take some." He started counting me out a pile of billion dollar bills very quickly - in exchange for $2 U.S. dollars. I started giggling. Yes - I'm a billionaire now. I give away billions of dollars - to people as gag gifts - it's fun. People start giggling. Sadly, the pricing power in that country has vaporized if you use their currency. They use U.S. dollars instead. That spiral downward of retail pricing strategies power is known as hyperinflation. Imagine the difficulty you'd have in moving from Union Square in San Francisco to Harare! Your understanding of the appropriate price of things would be all messed up until you grew accustomed to the new context. The simple fact is - different customers will perceive your prices differently. Some will complain bitterly while others giggle. The only logical response is to test different price points, have a solid plan, and try to be careful not to make changes based on one or two vocal customers. Having a solid plan will help you navigate these tricky waters. Different pricing strategies action stepsConsider the context in which your prospects establish their strategic pricing ideas related to your product or service. Make a list of the things that influence their thinking and consider how you can impact these situations. Test various prices to determine the market acceptance of your offers. Don't over react when you have one person complain about your pricing strategy . via Blogger http://ift.tt/2kcFvCb January 28, 2017 at 11:40AM
Retail pricing strategies: Location Pricing Power
It's not just the time of the encounter with your product that matters. The place creates pricing power too, (or destroys it) and aligns pricing with marketing and business. You want the process to be like this: https://2.bp.blogspot.com/-oGLBQ-AsZsE/WIwuMcnWwBI/AAAAAAAAAqA/tgfZYcrfdeQGT0hUFbLzCcftSMW4jI0uwCLcB/s400/Retail%2Bpricing%2Bstrategies.png
Three Great Places To Sell OnlineSome places online seem to make it easy to sell. Other places make it very difficult. Your job is to identify the easy places and expand your operation there, while avoiding the hard places. Three great places to sell online include,
The Hardest Place To Maintain Pricing PowerIf your prospect is in a buying mood - and they go looking for a solution and they find your item as just one option amongst many similar options - then you've lost your pricing power.So the hardest place to maintain pricing power is in a crowded & undifferentiated marketplace. Especially a marketplace that doesn't have any pricing controls in place for sellers. In that location your item becomes a commodity and commodities don't maintain pricing power. This situation can occur both online or offline and you need to avoid it. Department Store Retail Pricing StrategiesSome websites, like Amazon's Kindle platform, and Apple's itunes, give sellers guide rails they must stay within. This marketplace pricing strategy helps prevent a "race to the bottom". We call this a department store model.We use this strategy on our pixie faire site. By giving sellers guide rails we act as a safeguard to all the designers there. This helps stabilize customer expectations too. It is not an open marketplace like Etsy or eBay, where prices are set at the seller's discretion. It is more like a department store, where prices are carefully managed at the store level. Smart marketplace owners like to assert this level of pricing control because they commit to being the market leader and establishing price points. Steve Jobs did this for the music industry when he established 99 cents as the acceptable price for a single music track. These strategic pricing create a "safe harbor" for sellers and set buyers expectations. If a seller wants to deviate from these guidelines - they cannot do it. The Challenge With eBay & EtsyEBay and Etsy can both be problematic if you're selling popular items because there is no "safe harbor" in terms of pricing power. I'm not saying you can't do well on these sites, but a lack of stable pricing is the downside of selling in those places. The benefit of being on those sites is that they have tons of customers that show up in a buying mood.Three Ways To Maintain Pricing Power In Turbulent Marketplaces There are three ways to maintain sales volume and pricing power in a crowded marketplace where pricing isn't managed.
So if you're going to sell in a marketplace online, try to find options that include a "department store" pricing strategy, rather than an un-managed marketplace strategy. A department store strategy gives you protection from brutal price wars. Your most important task in a crowded and unmanaged marketplace is to find ways to get the customer to connect directly with you and your brand. Retail pricing strategies Action StepsMake a list of the places that your prospects encounter your products. Are you controlling those encounters and ensuring that your brand and product is presented in an effective way? Consider eliminating sales channels that have too many downsides. If you sell in a marketplace online, look for one that has a department store pricing strategy rather than a "free-for-all" pricing strategy.via Blogger http://ift.tt/2kcAI3u January 28, 2017 at 11:21AM
Strategic pricing with timing
People are funny about when they'll pay a premium for an item they want. As a smart price-ologist (with specific interest in finding how to fight a price war) you want to find these wrinkles in the Universe, study them, and set up shop there. You want to figure out how to sell at the specific times that give you maximum pricing power. http://ift.tt/2k2oM2hTiming Creates Strategic Pricing PowerEarlier we talked about a family planning a trip to Disneyland and how the prices at Disneyland weren't going to deter them from going. That's because your price can vary depending on how pre-sold your prospect is.But your price can also vary by when your customer encounters your product. Disneyland can charge premium prices for their gift shop items because people say in their head, "We aren't going to be here again for a very long time - we better buy this t-shirt as a memento." The Holiday Shopping season is the most top-of-mind example of how timing impacts pricing strategies in marketing. But there are many other examples, such as:
Does your product have this type of seasonality? The Easiest Time (EVER) To Make A Sale OnlineOf course, the easiest time to make a sale, and get a premium price, is when your customer is actively searching for a solution to their problem, (or a tool to help them meet a felt need or accomplish a project). That is why search engine advertising, (Google, Bing, Yahoo), makes so much sense. You are responding to people who are typing in phrases that indicate they want to buy something. That's a good time to have an encounter with a prospective customer.Here is an example on aligning pricing with marketing and business, At Pixie Faire we are truly blessed to be the #1 online destination for digital doll clothes patterns. We started in September 2009 with just 11 sales, but since then we've had over 350,000 patterns downloaded. 124,000 of them were in 2013 alone. Can you guess which month is our highest volume of sales each year? Why did you guess that month? (I'll reveal the answer at the bottom of this chapter - sneaky I know, right?!) Having Time On Your Side Creates Pricing PowerPricing Power exists when you can get time on your side. How do you do that? Here are a few ways:Run an auction The countdown timer is incredibly powerful. It's like a drum beat that people (who are in a buying mood) hear more and more loudly as the auction comes to a close. Price is NOT what they are primarily focused on it's the clock. Hold Selling Events If you set things up so that there is the real (and genuine) possibility of items being "sold out" - and that is clear to everyone involved you're pricing strategy will have pricing power. People stampede (sometimes literally) when they think items are going to be unavailable to them in the future. Small Batch Scarcity is one of the most effective psychological triggers when it comes to buying. One common way online retailers use scarcity is by selling things in small batches. We use that technique to help sell our physical items. If Time Is On Your Side - Sell MoreWhen customers are in a buying mood, you also want to ensure they get a complete set of options. They might want to add more to their shopping cart and you want those items to be easily available to them. You can do this by adding:Up-Sells The up-sell is simply offering your customer a larger, or bigger version of the product they're about to buy. One of the most famous up-sell phrases is "do you want the big one?” Of course McDonalds got into PR trouble for their famous slogan, "Super Sized?” They stopped using that phrase for PR reasons, not sales reasons. Cross-Sells The cross-sell is simply offering the customer a related product before they finish their transaction. The most famous phrase associated with cross-selling is, "combo?" Meaning "would you like to add fries and a drink to your order?" Recurring Payments Getting buyers set up on a recurring purchase arrangement is probably the most powerful selling technique of all time. Instead of asking the customer to simply buy the item one time, then having to ask them again, you simply ask them if they'd like to be set up as a recurring purchaser automatically. Product of the month clubs, membership sites, and related programs help accomplish this task. Strategic pricing Action Steps:
via Blogger http://ift.tt/2jfvVio January 28, 2017 at 10:34AM
Pricing Strategies in marketing: Pre-selling
Your price can vary depending on how pre-sold your prospects are about your new product. If your prospects are eagerly awaiting your new product, then you can charge a lot more than if they aren't familiar with you or your product. http://ift.tt/2jwRDNeWhy Pre-selling creates pricing powerImagine a family preparing to go to Disneyland - are they going to stop the trip because Disneyland raised the price of the parking? No. They are so pre-sold that it doesn't matter. Imagine if a customer has been waiting for two years for your new product to hit the market. Are they going to care if it’s priced at $19 rather than $9.99? Probably not. The price is not their primary focus. Pricing Strategies in marketing: Ways To Pre-sellThere are lots of ways to pre-sell. Smart marketers know that the success of their product frequently depends on the amount of pre-selling that can be done before the product "hits the shelves". Here are six great ways to do pre-selling:
Fueling The FeelingThere are a few key emotions involved in being pre-sold. As a marketer, you want to evaluate your images, copywriting, and promotional activities to ensure that you are connecting on an emotional level. You want to do work that will fuel:Anticipation According to Wikipedia, anticipation is, "The process of imaginative speculation about the future". Trust Trust in a retail context is earned as people begin to believe they will like and approve your future actions. Hope They say that in business "hope is not a strategy", but when it comes to marketing, instilling hope in your customer's hearts is a great strategy. Surprise When you conduct an unexpected event you create a sense of surprise. Or, when people know you're event is coming up, but don't know what you're going to reveal, then you've set the stage for a fun surprise. Joy In a retail context, joy is about happiness with the product, the buying experience, and the overall interaction with the company. Some products can deliver a deep level of emotional joy. But even with less emotionally charged product offerings, you can still create joy by your actions and the overall experience the buyer has with you. Pricing Strategies in marketing: Action StepsBrainstorm ways you can develop complete products lines that make pre-selling easy. For example, consider how your products can "fit together" to make pre-selling feel natural and easy. Learn to create "launch stories" that generate interest and enthusiasm before your product is on the shelf, and if you don't already collect email addresses, start today.via Blogger http://ift.tt/2jlXTUZ January 27, 2017 at 06:51PM
How to align pricing with business?
What impression do prospects have about your work? Your brand is the sum of the impressions residing in the minds of prospects. http://ift.tt/2kn7sIjThe simplest impression to make in the mind of a prospect is the impression associated with pricing. Therefore the most important activity a small business owner can embark upon is marketing work that aligns with their pricing strategy. Aligning Pricing & MarketingSo how do you create visibly excess demand? Or in simpler terms - how do you show you have more people who want your product than you can serve? Let's look at a few common ways.How Luxury Retailers Do ItLuxury retailers frequently use a pricing strategy known as Premium Decoy Pricing. It works like this you make a $3,000 purse, (for example), and then set it next to your $300 purses. The strategy works effectively in three ways.
How Liberty Jane Clothing Does ItWe sell our doll clothes at auction on eBay as a marketing activity that helps us demonstrate we have high demand for our products. We've done it for six years now and when people see the auctions end for hundreds of dollars they usually respond with comments best described as sticker shock. Our most recent auction sold for $394 with 45 bids being placed.We do these auctions twice a year to display our newest work, which we release as a Spring Line and a Fall Line. We do our best to make the auctions a big event for our fans and followers. They are our version of a runway show. Of course the designs have to be original, interesting and impressive, but that isn’t adequate for success. The photography, copywriting, and overall selling strategies are critical to the outcome too. We like using auctions for several reasons, Legitimacy These auctions serve to legitimize our premium prices. They give us the social proof needed to sell our other items at premium prices. Popularity As Dan Kennedy recommends, these auctions demonstrate we have plenty of customers willing to buy our items at premium prices. You can't fake an eBay auction. You can't fake the terrific customer reviews that people leave after they get their outfit. Attention These auctions draw attention to our newest designs and products. They serve as a type of runway show for us. Align Pricing with Business GoalsThe tricky part about business is that you never know exactly what your competitors are doing.In the real world of competitive marketing different businesses have different goals. Some businesses are laser beam focused on a goal, while other businesses drift along aimlessly. As a smart price-ologist you've got to align your pricing strategy to support your business goals. You might be wondering, “How does this relate to the pricing principles we've already outlined?” The sequential progression of activities would look like this:
Making A Profit Profit is your actual income from a business after all expenses. Most public companies are mercilessly focused on short-term profits. The shareholders demand it. Since most people are in business to make money, you'd think this would be the primary goal for each small business owner, but it's not always the case. There are many circumstances in which the profit from a business is not the primary goal. Gaining Market share If you use penetration pricing to capture the leadership role in a market, then you've sacrificed short-term profits, for the opportunity to dominate a market for the long-term. In online marketing, this is particularly crucial, since many markets are known as "winner take all" markets. In other words, it's only the market leader that makes money. So market dominance is a key goal for many online sellers. Maintaining The Status Quo Sometimes business owners simply want to keep the marketplace as stable and calm as possible. Their goal is to meet customer needs without picking a fight with competitors. Generating Cash flow Sometimes businesses just need cash as quickly as possible. They frequently decide a discount or short-term sale is the solution. They have excess inventory and decide to exchange it for quick cash. This is a bad idea over the long-term, but sometimes desperate times call for desperate measures. Survival Businesses that are on the edge of closure have to do everything necessary to stay open. Sometimes that can mean selling their entire inventory at any price they can get. They are willing to sell things at a loss, regardless of what the long-term ramifications are for their competitors or the marketplace. Reputation Sometimes people don't want money - they want respect. They want attention and PR. In those cases, they are willing to ignore common sense related to pricing, so they can get attention. Fulfill Your Calling Sometimes business owners feel a deep spiritual conviction to use their business to fulfill social, spiritual, or cultural goals. They value stewardship and the opportunity to change lives. Sometimes these people work in a non-profit context, but not always. Generosity Sometimes people want to give back, help others, and contribute to the betterment of mankind. They are focused on the number of people served, more than profit. Goals Change Over TimeWhen we started Liberty Jane Clothing we had several goals that drove everything we did. They included:#1. Reputation. We wanted to be known in the doll-clothing niche. This was our top priority. It was more important to us than making money. #2. Making $1,000 a month. We wanted to grow a business, and we "only" needed $1,000 a month from it. For a small home-based business that seemed like a good first year goal and we struggled to meet it. But as we grew and could start taking more money out of the business, we chose not to. Instead we started investing our profits back into building the business. We decided we'd take the long view and reinvest our earnings into the business so it could grow bigger, faster, and stronger. The Best DefensePart of the challenge of business is dealing with the impact of other competitor's goals. Everyone is trying to do something - and frequently you get caught thinking, "Dang, why didn't I think of doing that" as you see your competitors roll out an exciting new thing.How do you combat this? As they say, "the best defense is a good offense". Which means as a business owner you have to decide what business goals you're trying to achieve. Then you focus on them relentlessly. You set the goals and launch the new initiatives. You strive to reach new heights instead of watching other people climb the mountain. Being proactive is much more productive than reacting to what other people are doing. Of course you can't operate in a vacuum, and you have to respond to some competitors actions. But most often, the market is just there, full of randomness and chaos, waiting for someone to do something deliberate - be that person. Establishing a business goal and focusing on it relentlessly will separate you from the pack very quickly. If you take the time to consider a smart pricing strategy in support of the business goal, and a smart marketing strategy that reinforces the pricing strategy, then you'll be doing more sophisticated work than most of your competition. Aligning Pricing with Marketing and Business Goals Action Steps
via Blogger http://ift.tt/2kn8eFg January 24, 2017 at 06:53PM
How to fight a Price War?
Your actions impact your competitors, and their actions impact you. So the second pricing principle is to ensure you don't start a war you can't win. http://ift.tt/2jkW7q8What if you sell your item on average for $20, and an impressive new competitor starts regularly selling a very similar item for $10? While that new low price may be good for customers, it's bad for you. If either you or your competitor decides to employ penetration pricing, even if it's just through a short-term sale, then the other person has to decide what they're going to do in response. Do you match the offer? Do you ignore it? Do you offer an even deeper discount? Don't Start A Price War You Can't WinMost pricing managers, in the absence of a real pricing strategy, arbitrarily put items on sale when they feel like sales are slow, and hope that prospective customers notice and decide to buy. Or maybe they have too much of a certain item, so they decide to put it on sale to get sales moving.These managers also hope that prior purchasers who paid a higher price, the competition, and their bookkeeper don't notice these sales events, because these people will be upset about the new low price. In my view, putting items on sale arbitrarily says three things:
Before you put things on sale, or offer discounts, think long and hard. Consider the profit margin you're sacrificing and whether you can truly afford it. Consider how your customers will perceive you and your products after the sale is over. Consider what your competitors might do in response. Part of the problem with short-term promotional sales is that both the customers and you get addicted to them. Customers change their behavior when short-term sales are added into the equation. When you do a sale customers learn quickly that if they wait, the item will go on sale again, therefore they delay buying. Managers get addicted to short-term discounts and sales because they boost short-term results. The more pressure there is to hit short-term sales goals, the more there is a temptation to hold a sale or offer a discount. But over time, just like an addiction to any bad behavior, the negative consequences will catch up to you. You will go out of business. Starting The Price War You Can't WinSince most of the people reading this won't follow this advice, and will eventually find a reason to start a price war, then let me give some thoughts on doing it.If you enter a serious price war by committing yourself to penetration pricing over the long-term and you take lots of customers away from your competitors with this strategy then you're left with lots of new customers that permanently expect the lower prices. If you can actually make a profit selling at the new lower price, then you survived the price war. But don't expect to re-inflate your prices very easily - that's like trying to rehydrate beef jerky life doesn't work that way. Of course, you'll also have to brace yourself for a troubling fact. There is almost always someone who can make a product, or deliver a service, cheaper than you can. You've got to prepare for them doing the same thing you just did and this time you've got to figure out how to survive it. The only price war that makes any sense is the price war that you win and by winning it you become the market leader. The leadership position in a market is worth battling over. But you shouldn't try to start that battle unless you have a serious shot at winning. How Costco Wins The Low Price WarYou might be saying to yourself, “Well, obviously the low price leaders do well, why not be one?”The reason it is difficult to be one is because you have to create a way to sustain your low prices. A great example is Costco, the Seattle based warehouse store. If you look at their total revenue, they are the 4th largest retailer in the U.S. behind Wal-Mart, Kroger, and Target. But Costco only has 435 stores, whereas the others have between 1,778 and 4,550. So Costco makes more money from each store than anyone else. How do they sustain their business so successfully? They use several strategies, including:
Jim's answer was simple. "Because people would buy them" That night I realized what he was doing. He's providing a discount to customers in exchange for them making a bigger purchase than they otherwise would have wanted to make. Those bigger purchases allow Jim to get bigger discounts from manufacturers when he is negotiating the prices from his suppliers. So while you can go to Walgreens and buy aspirin for $6.99, you're only getting 100 pills. When you go to Costco and buy aspirin you're spending $13.99, twice as much. But you're getting 500 pills. You're getting five-times as much on a per pill basis. This allows Costco to transact fewer orders as well, for higher total dollar amounts. So while they are a low-price leader, their business model allows them to reap many of the rewards of being a premium provider. These strategies and others allow Costco to maintain its system of low-cost selling. Like Costco, if you're going to embark on that venture, ensure you have systems in place that make your low-cost selling strategy profitable. Forced Into Price Wars You Don't WantIf you've tried to sell items for a fixed price on Etsy or eBay then you understand the problems related to open marketplaces that don't have any pricing controls.You're almost forced to compete on price. This wild-west type environment creates a "race to the bottom" where people compete on price, by constantly lowering prices; until there is no possible way anyone can make money. You want to avoid these situations at all costs. How to fight a Price War Action StepIf you're addicted to promotional sales and discounts, work to stop them. If you use them occasionally, work hard to find new alternatives like promotions, contests, and fun engaging social activities. If you've considered using penetration pricing as a strategy to gain market share, be sure you know what you're doing.via Blogger http://ift.tt/2jkZhdR January 24, 2017 at 12:13PM
Pricing strategy overview
The first lesson of pricing is that you need a plan for doing it, rather than being random or arbitrary. That sort of seems like common sense when you hear it, but most marketers setting prices don't have a well-developed plan. http://ift.tt/2k86z2YThere are three basic pricing strategies that you can choose from. Pick one of the following: Pricing Strategy #1 Premium PricingAlso known as "Skim" pricing. This is the pricing strategy designed to take maximum money from the fewest possible customers. It's a strategy of the luxury brands and ultrapremium providers.The premium pricing strategy requires the highest & best branding, photography, copywriting, and overall salesmanship. You can only do it over the longterm, and make money and a real business venture out of it, if you have a very powerful brand. Warren Buffett calls this, "a castle with an unbreachable moat". This strategy requires a focus on quality, design, and brand building not on shortterm sales goals. There is a lot of pressure to surrender and lower your prices when you use this strategy. You can use this strategy for a short time when you're the first to offer a product in the marketplace. But as competition grows your ability to maintain premium pricing diminishes. Competitors will begin to offer lower priced alternatives. Therefore, the only lasting use of premium pricing is by businesses that can develop a powerful brand. This strategy has the potential of giving you high profit from a low volume of transactions. Generally that is great because it's easier to run a business with fewer transactions and customers than it is with lots of them. You won't sell the most, but you'll be the brand that everyone says is the 'best', 'coolest', most admired. Strategy #2 Neutral PricingA Neutral pricing strategy is designed to keep your prices similar to your competitors not much higher or lower. It's a safe place to hang out, right in the middle of the pack.Neutral pricing allows you to focus on competing in other ways beyond price. You won't be raising any eyebrows, or starting any price wars. But if you can focus on quality, presentation, copywriting, and marketing skills, then you can earn a loyal following. In a crowded marketplace, neutral pricing is frequently the best strategy for people who aren't the leader. It has the potential of allowing you to make moderate profit from a moderate volume of transactions. The problem with this strategy is that it's hard to build a successful business without either a lot of profitpertransaction or a lot of transactions. Using this strategy you have neither. But you do have an emotionally safe pricing plan. Customers probably won't beat you up over your price. You probably won't hear too many complaints or frustrations. That makes life easier. Strategy #3 Penetration PricingPenetration pricing is also known as being the lowcost provider. It is a strategy that can potentially give you the most sales volume, but frequently that comes at the expense of profits.Penetration pricing has the potential of giving you a small profit from a high volume of transactions the opposite of Premium Pricing. And as Walmart and Costco have proved, a small profit from a very large number of transactions is how you can make billions. On the surface this is a very appealing pricing strategy. It gets you sales and sales are the lifeblood of any business. But making sales isn't the same thing as making profit. There is nothing worse that working very hard at a business, making lots of sales, and then realizing you haven't made any money. When the margins are tighter, you have to be much more careful. Penetration pricing is only a good strategy if you can actually grow a profitable business using it. In a profitable business you can cover payroll, pay taxes, keep the lights on, buy new computers, and have enough money to do the marketing and advertising necessary to grow and expand. In other words you're not broke. Since penetration pricing gives you the least amount of profit per transaction, if you decide to use it, you’d better be crystal clear about your true costs for all the parts of your business. If you don't know these exact numbers for your business, then you probably don't want to use penetration pricing:
Many companies use penetration pricing strategies with a single product, in order to sell their other products to the same customer. You can use penetration pricing for one of your products in order to get attention. The risk of doing this is that you permanently damage the "perceived value" of your overall brand. But, when you can do it without causing damage to your brand, then you'd be smart to try it. The strategy of using a low price on just one product is known by various names, including:
Pricing strategy Action StepTake a step back from everything you're doing and truly evaluate your pricing strategy at both the individual product (or service) level, and the overall business level. Are you following a pricing strategy or are you acting randomly? Begin acting intentionally and create a pricing strategy today.via Blogger http://ift.tt/2jh5HKU January 23, 2017 at 06:35PM |