Pricing strategies are often the last marketing mix tactic that most business owners consider important, but the first to get attention the moment sales decrease!  Maybe you've never considered how your pricing strategies can maximize your profits.
This is the first of a series of articles on using pricing strategically to maximize your marketing results.
So, we'll start with some basics - here's seven pricing options you can consider when initially setting your prices.
1.
Competitive pricing - where you study competitors pricing and align your pricing around your competitors price, depending on how you position your products and services.
2.
Cost plus mark-up - Instead of considering competitive pricing, review your own cost structures - if you are more efficient than a competitor or better at buying you may be able to price lower and offer products of similar quality, or you may be able to enjoy higher profit margins! Be careful to ensure that your pricing is in line with customer expectations or you may not find yourself in a competitive position.
3.
Loss Leaders - a common marketing strategy where a desirable item is sold at or below cost to attract new / more customers.
Combine with an up-selling or cross-selling strategy to achieve profits short term.
Ideal strategy to use in advertising if you want traffic through your shop.
4.
Overstocks  - Excess inventory can be sold at a strong discount to avoid storing or discarding it.
Useful when you need to minimize losses.
Inventory management is a higher priority than profit if you are using this strategy.
Overstocks can also be used as a loss leader if the product is desirable.
5.
Bundling and quantity discounts - Reward customers for bulk purchases by offering quantity discounts or bundling complementary products.
Bundle overstocks with popular items to avoid overstock sales.
Bundle a new product with established products to build awareness.
This is a great value-add strategy and should not be confused with regular 'no purpose' discounting! 6.
Membership, loyalty programs or trade discounting - Knowing what an A+ customer looks like for your business can help you segment and attract business from profitable customer segments by offering special prices.
You can use selective discounting, percentage off savings or other rewards to keep these clients loyal.
7.
Versioning - This strategy is very useful for services and technical products.
The same basic product or service is sold in a number of versions.
This is where you see free trials or basic versions available very cheaply.
Consider adding upgrades, additional services or risk management type products (eg warranties, insurance etc) to your base product as well.
You may be wondering where discounting fits in!  As a business coach, I teach my clients to try many other pricing strategies before discounting - it really is the pricing strategy of last resort! When you start discounting, everything including your profit margins will go downhill from there!!  Of course, there are many other pricing options to consider, however these are good basics to consider when deciding how to price your products and services.
  Find out more at a free teleseminar on pricing strategies - 7 April 2009