7 Pricing Strategies for Small Business

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An effective pricing strategy is crucial for your small business growth. Learn everything you need to know about pricing right here. Read More: https://kylas.io/business-growth/small-business-growth-pricing-strategy

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7 Pricing Strategies for Small Business

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Cost-Plus Pricing

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In Cost Plus Pricing you calculate the cost of producing your product or offering and then add a margin to it for the amount of profit you want to make.

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PROS CONS It’s one of the easiest pricing strategies to implement. Does it work Not always. If you haven’t calculated costs properly you’ll find the cost of your product constantly extending or fluctuating. You’ll also find that you might not meet your target margins because this strategy doesn’t take into account consumer perception.

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Competition Based Pricing

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In competitor based pricing you price your product and services based on the research of how your competitors build their pricing tiers what features they differentiate on and what they use as their core value metric.

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PROS CONS This strategy helps you place your brand a little more advantageously in the market and stay fluid with your pricing As your prices are being determined by the averages in the market you’re not necessarily able to offer customers a big price advantage. Even your margins will be limited by the competition.

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The Prestige pricing strategy is one where companies price their products/services higher than market value to give the impression of better quality.

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77 of consumers are willing to pay more if they receive excellent services from a small business Source: Hubspot

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PROS CONS The margins are much higher and you know exactly who your audience is. Your target audience is a niche one and you’ll have to invest in creating and maintaining brand image.

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Tiered Pricing

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Tiered pricing strategy is the one where you have different price ranges for different types of customers. In this strategy the price increases in tiers based on either the number of users or the amount of usage. Companies usually offer a corresponding number of features and access also with each tier.

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PROS CONS You can cater to different audiences and increase your product adoption You could create a bit of confusion for small business owners who aren’t yet certain where their needs lie and how they should strike the right balance between a lower price plenty of features.

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Freemium Pricing

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In this pricing strategy you offer a base version of your product for free – meaning with limited features – in the hope that your customers will love the product and upgrade to use more features.

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PROS CONS This strategy is great for widening the top of your funnel. If your customers aren’t engaged you won’t be able to get them to upgrade.

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PROS CONS People are extremely open to trying a great- looking product with a free version so you’ll find that your lead generation goals and freemium download goals will most likely be met quite easily With software a certain number of users who have signed on simply don’t end up using it and many of them only use some features

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PROS CONS If you want to simply get a lot of people to try your product this works. This is a positive for you when you’ve charged them a price – when the product they’re using is free not so much.

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Psychological Pricing

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In this pricing strategy you offer a base version of your product for free – meaning with limited features – in the hope that your customers will love the product and upgrade to use more features.

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2 Types of Pyschological Pricing Pricing Placement FOMO Pricing Shortened Pricing Charm Pricing Rather than using multiple digits to denote your price you keep it short simple – just 30 or 9 not even a dollar sign FOMO pricing gives your customer the impression that the pricing is a limited period opportunity that can’t be missed. Involves placing your prices in a way that customers see them after the product has already caught their eye. Char Pricing is used to create a psychological influence and to sway customers to buy products or perceive them a certain way. Odd numbers are the foundation for charm pricing.

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PROS CONS You can subtly influence customer behaviour without it seeming underhanded or really influencing your brand in any negative way. None really As long as you implement these tactics with care you’re all good to go.

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Bundled Pricing

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In this pricing strategy you group together two or more of your products/services and offer them at a discount. This makes consumers feel like they’ve gained a great deal. As a result you sell more products and have customers try more products at a time

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PROS CONS You can gain favour with customers while increasing your long-term sales. Bundles are also a great way to attract new customers. This usually can’t be a primary pricing strategy it really depends on your offering – and not necessarily a long-term one either based on your product or service.

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To learn about this topic in detail