Pricing, Products And Lots More: How All Results In Profit For You?

Posted on Jun 6 2012 - 1:26pm by Editorial Staff

Seeing other products and saying that it is priced hugely high but what if it sounds like: you have to do pricing for your own product – the more difficult task to chase upon, but yet you have to figure out. We can’t define without thinking in all manners that if I price high, then how much of actual consumer will buy the product? And if I value the product lower, does it really turns mine sales into profit? There are many other questions too that will strike your mind, but all-in short there are no clear path to or formula for finding the best pricing for the product.

THE FIRST FACTOR: WHAT OTHERS ARE CHARGING?

Common Questions:

  • Is your competitor going on with simple flat rate basis?
  • Is your competitor offering first month discount scheme with increase in pricing with more than double the discount on offering chart?

I am starting a new venture, must be a product, how much number of units I will put in that will results into a profit for me or one can say how much sales I have to do, that will make a good fortune for me – long questions but still not a difficult one.

Suppose, you are planning to start a service, say you are intended to offer your clients, Internet Marketing service on monthly basis – the first idea definitely comes your mind that if the competitor is offering at that much, then how much do I will offer – but before figuring out, you must understand that the other Internet Marketing company is offering the service from many months or years or even if it too has just started what makes it pricing so varied.

Let’s get back into recap, your competitor is in business from few months, say, he too has gone through the point that how much clients it will make into the first month itself, how much clients it will get more in second month and so on… means the company (competitor) already did a detailed study with assumption on sales figure (or you can say it as prediction).

Condition 1:

Suppose, the first month, 5 clients come, for the second, 15 and for third, it would be 25.

5 + 15 +25 = 45 – the nos. are increasing, prediction works well here.

But, what if the first month sees 5 clients, second 10 and third 5, means a swinging graph.

5 + 10+ 5 = 20 – the swinging graph.

Now, first going through first increasing client graph nos., the company plans to charge $100 flat rate per client, the final figure comes in three months would be $4500.

Whereas, for second swinging graph, the final figure for three months comes at $2000.

Condition 2:

Now, what the nos. are swinging – now plan like if your competitor offered $50 per client for per month and from second month onwards $125 per client.

The total money will be made $50 + $125 +$125 = $300 per client in three months.

Now, for total 45 clients, the number will make $13,500 on three month basis.

But if the company thinks, there would be strong possibility of up and down; the price would be $75 per month followed by $150 on per client basis.

Now, calculating for the second month, $75 + $150 + $150 = $375 per client for three month period.

And, 20 client nos. will make still $7500.

The figure is not that much as of first case but also to be noted here that the clients no. I=in second case is half.

Summary:

Sustaining, an overview here: Do check competitor plan report first before implementing your own pricing plan. There would be possibility of hardly marginal difference but that margin too makes a profit for you as like in the above case. The condition 2 holds better chance to stand in long run in the market as compared to condition 1.

THE SECOND FACTOR: DEMAND AND SUPPLY

Common Questions:

  • What if demand is low, does there are chances I will make profit?

I chosen an industry which is having not much demand, but still I want to be a part of it – but the big question strikes here how do I make profit – Yes, profit – the big, common question. The answer is yes you can but what you require to have some is go through some cheesy old Economic theory which says that as we raise the price bar, the number of sales will drop i.e.

Increase in Price = (1 / Sales Drop)

Well, if this is true, then it would also be true, a demand is low and I am pricing it at normal pricing just like many others offering but what makes mine product better is I am offering some add-on features, not much, but some. The price for each product unit I am offering is say $10 – and I have made mine mind whatever the things come in between, I will keep the thing as same price, although I will keep doing some promotions in between, so now what the formula make sense:

Same Price (in similar low demand market) + Promotions in between = Sales with better figure

Sales with better figures, means resulting in profit, now how it is possible, as I said I am offering a product for $10 each unit, and doing the same for next two months, now I am seeing that other competitors are binding up (because of one to many reasons), now it is the time that from third month, I am pricing the same product at $12 each unit, (Remember: I am not pricing much higher, just a nominal increase). If, those other competitors are binding up, mine first target here is to grab their clients, now how to make this possible: Promotions.

Yes, offering promotions in between is a best marketing tactic to grab more end user. But, here again a condition comes, do the promotion is only for new consumers or it would be also for current users, who are being loyal with me from last two months, answer is again Yes, it is for both, but how by offering to both makes this as a profit to me.

  1. Offer the new clients, a fresh promotion through new sign-ups
  2. Old clients, will too get a promotion but right in their inboxes or dashboards

Now, what divide the both, new sign-ups offer are strictly for new clients (or new users or new end users, whatever you wish to say), even an old one also grab this new offer, but what required here is a fresh new account.

Being, loyal with old clients, sharing an offer with them in inboxes or dashboards means they still are part of the family and they are always kept on heaven with better service promise (but tactic here, you can offer old client, promotional amount half that you are offering here, keeping both happy).

Summary:

Competition always remain the same, sometimes more new players enters into the market, sometimes old players increased their supply than even if demand of the product in market is low, what matters here is how much you remain loyal with client in terms of offering services (not to forget, going here by promotional way)

THE THIRD FACTOR: COMMON POINTS TO CONSIDER

  • Determine the product’s objective value
  • Understand the product’s perceived value
  • What value do I want to convey through the price?
  • Which pricing format do I select? –Straight flat rate format or Tiered pricing
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Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.