People want to buy your stuff, but where is that sweet spot of pricing. James talks a few different models.
Hi, I’m James, this is another Whiteboard Wednesday, and we’re going to talk about Pricing today because I guess you guys want to make money, I don’t know.
So we’re going to look at three, very simple “based” models on how you can price your products, and pricing strategies.
So let’s start with the most obvious one: COST BASED PRICING.
You’re taking your parts and materials, and that cost that you have taken on, plus any labor and other expenses that go into the completion of a manufactured product, or distribution of the product. And that will come out to a specific total that you are charging to your customers.
With COMPETITION, you’re now looking at the field.
What does a competitor, BRAND A, how much do they charge for their distribution, for their manufacturing. Or even just similar products that you might be competing up against, what do they charge? What does the market look like? What are the trends?
The competition based model you’re more worried about making sure that any customers that might be on the fence with Brand A, B, C, whoever your competitors are, you’re trying to lure away some other customers from them, at the same time as staying competitive price wise.
Then there’s CUSTOMER VALUE.
This is building yourself up as a more premium provider. You’re taking your product and really making sure it’s of the highest quality, and letting people know that that is the case, and then ensuring really great customer service. People are not just buying “a” product, they are buying “your” high-end product, even if it’s something simple. They know they are going to get quality, and they know that they are going to be taken care of very well.
So, in dealing with all these different pricings, there’s not just one way to do it. If you simply do it at your cost, you’re not looking into competition, and what others are charging. Maybe you’re not charging enough. In fact, maybe you’re going about the wrong process, and in the end, because of other expenses. you’re charging too much, and it’s hurting your competition.
Or if you’re only focused on competition, you might find yourself ending up in a price war where you’re trying to be the lowest bidder, and you’re losing sight of what your costs are, and also your value.
And then again with customer value, you might be so focused on building out a big name and quality product for something that people aren’t necessarily looking for a quality product in. They just want bare bones, basic, give it to me at a good price, at a fast rate, and I’m yours.
So why talk about these tiers of pricing? What can you do about it? You need to be constantly keeping an eye out for your market trends, for how much your products are going out, if there’s any seasonal changes. You need to be checking the quality, how much of product is being scrapped or being returned, or if there is any kind of customer service problems.
If we can pull in the aspects of the best parts of all these models, we can create a model that will better lend itself towards are products, towards are goods, and towards are distribution.
So, if you are wanting to make sure that you are staying on top of your pricing, make sure that you are looking for these elements. Once your company figures out what it is strategically trying to accomplish with pricing, it makes it very clear to its employees, to its customers, so that there’s no confusion.
If you need to make different tiers of pricing relative to your customers, and how much they purchase, and at what volumes, set those guidelines in place so that there’s no guessing. No customer likes to guess what you may be charging this month, this week.
Make use of these models, incorporate it into your business, and then monitor it, track it, and your company with thank you for it.
That’s this Whiteboard Wednesday, I hope your pricing brings in lots of money. You know. You probably want that.