1.  The Four P's of Marketing

2.  What Is Your Objective?

3.  Pricing Myths Exposed 

4.  Price is a Perception of Value

5.  Testing Price Points

6.  Teeter Price and the Six Questions

7.  Six Techniques to Present Your Price

8.  Advertise Your Price?

9.  Pricing Rules for Rounding Off

10.  Price Gimmicks that Work

11.  Successful Discounting Strategies

12. 10 Stealth Ways to Increase Your Price

13.  Never Compete On Price

14.  Conclusion

Often the difference between a winning product and a loser is how you price it.  Sales tests have shown that price is one of the most compelling factors that determine the success of a sale.  Readership surveys have shown that readers will often skip copy just to get to the bottom of the advertisement to find out the price. 

The Four P's of Marketing

For those of you who have studied marketing in school, you'll remember the Four P's of Marketing, (1) Product, (2) Place, (3) Promotion, and (4) Price.  These four elements of marketing together determine the success of your product or service. 

When determining a strategy for a profitable business you should ask yourself four critical questions as a result of the Four P's...

1.      How can I improve my product?

2.      How do I get it from point A to point B?

3.      How do I tell people about it?

4.      How much should I charge for it?

The first three questions all have a cost associated with them.  Only the fourth question actually determines how much money you'll bring in.  So pricing is a critical question that should be considered carefully.

What Is Your Objective?

When pricing your product or service you must always have an objective in mind.  Knowing your objective will have a huge impact on the final price you set.  It is true that the ultimate objective of you price is to make the most money possible.  However, there are different routes to reach that objective.

For example, the following are six pricing strategies to meet certain objectives.  Each strategy will, perhaps, result in a radically different price to meet the objectives of the business.

Strategy #1 - Pricing low to penetrate the market and gain customers.

Objective - Perhaps you're just entering the market with a new product and you want to gain as many customers as possible. 

When to Use - If you have a big "backend" product that you plan to sell as a follow up to the lower priced "front-end" product.  Or it might be that you have a consumable product that people will buy over and over again so you want to gain customers, get them hooked on your product or service, and then slowly raise the price.

Strategy #2 - Pricing high to skim maximum profits.

Objective - To gain the maximum amount of profit per unit in the shortest amount of time.

When to Use - When your product is unique and new with no competition and you have a short window to skim the maximum profits before knock-offs start flooding the market.

Strategy #3 - Pricing low to crush the competition.

Objective - You want to squeeze your competition out of the marketplace so they no longer compete with you.

When to Use - Your product is a perceived commodity and you have one or two competitors with which you are constantly having price battles.  (By the way, technically this practice is illegal)

Strategy #4 - Pricing to make a "normal" profit.

Objective - To set a price that is seen by your customer as honest and reasonable.

When to Use - You may be on contract (such as a government contract) with a customer that you have a long-term relationship with and whose trust you value immensely (and who does periodic audits on your books).  In this case you might use a cost-plus pricing strategy.

Strategy #5 - Pricing to the market to be competitive.

Objective - When you want your stay competitive and be considered for any proposal, bidding, auction or other competitive pricing situations.

When to Use - When your product is very similar to your competitor's and you are limited in the methods you can use to differentiate it.

Strategy #6 - Pricing for maximum profit and maximum sales.

Objective - You want to get the maximum amount of profit possible but not at the expense of losing customers.

When to Use - After your initial introduction and you have the ability to differentiate your product.

Hopefully after reviewing these six strategies you realize that your price is not just a function of the cost to produce your product or deliver your service but is more a function of what you're trying to achieve.

Stay tuned for Part 2 (Pricing Myths Exposed)in our next edition

David Frey, President of Marketing Best Practices Inc., a Houston-based small business marketing consulting firm, is the senior editor of the Marketing Best Practices Newsletter featuring small business marketing best practices.