Time-tested strategies for making the best possible pricing decisions and gaining an unbeatable competitive advantage Pricing is one of the most important—and difficult—marketing problems companies face when launching new products. Unfortunately, the research that goes into making optimal pricing decisions is a very time-consuming process—unless, that is, you can afford to pay a consultant or outside agency to do it for you. But if you're like most small- to medium-sized business owners and managers, time and money are two things you absolutely don't have to spare. Problem solved: Written by a nationally recognized pricing expert, this book arms you with proven strategies for guaranteeing that you'll never again leave money on the table when determining prices. And you'll spend the least possible time setting your more profitable prices.
- Packed with valuable worksheets and other valuable tools to help guide your research and your pricing decision-making
- A goldmine of expert tips for pricing in any specialty market, it offers a highly effective way to market your company's product more effectively and profitably
- Shows you how to avoid making your competitors' pricing mistakes and gain a powerful competitive edge in the process
- The author uses examples drawn from her years of consulting work with companies large and small, including Food Network, American Express Publishing, and Playboy
Table of Contents:
Preface xv
Author Credentials xv
If You Can Afford a Pricing Consultant . . . xvi
Don’t Have the Cash to Invest? xvii
How Big of a Rush Are You In? xvii
Chapter Summaries xviii
Acknowledgments xxi
PART 1 HOW TO SET PRICES FOR MAXIMUM PROFITS 1
Chapter 1 Why Pricing Is the Key to Your Success 3
Raise Prices—or Sell More Products? 3
Big-Company Case History 5
Tiny-Company Case History 5
Chapter 2 Why Most Companies Stink at Pricing (and How You Can Do Better!) 7
The “Myth” of Creating Demand Curves 8
How Your Competitors Are Setting Prices 9
Cost-Plus Pricing 9
Match-Your-Competitors Pricing 11
PART 2 HOW THE MARKET WILL VALUE YOUR NEW PRODUCT 13
Chapter 3 Analyzing Your Competitors’ Prices 15
You Do So Have Competitors! 15
How to “Pick” Your Competitors 16
Direct vs. Indirect Competitors 16
How Consumers Evaluate Prices 18
How to Get Profitable Ideas from Your Competitors 19
Chapter 4 Environmental Factors That Can Affect Your Pricing 21
Environmental Factors Overview 21
The Economy 21
Competitors 24
Government Regulation and Legal 24
Social Trends 25
Technological Change 26
Chapter 5 Pick the Positioning of Your New Product 29
There Are Only 3 Choices! 29
The Psychology of Price Positioning 30
Penetration Price Positioning 31
Skimming (or Premium) Price Positioning 35
Competitive Price Positioning 38
Learning More about Competitive Pricing 40
Chapter 6 Analyzing Your Buyer Benefits/Drawbacks Relative to Your Competitors 43
Uncovering What Buyers Really Value/Hate about Products in Your Marketplace 44
Learn More about Calculating Buyer Valuation of Different Features 44
Chapter 7 Picking a “Ballpark” for Your Best Price 47
You Will Not Be “Stuck” with Your Decision! 48
Can’t Make a Profit at that Price Range? 49
Not Sure about Your Results? 49
Learn More about Buyers’ Reactions to Price Ranges 50
PART 3 YOUR COST ANALYSIS 53
Chapter 8 Evaluating Your Costs 55
The Ideas Behind “Target Costing” and “Target Engineering” 55
Types of Costs 56
The Hardest Part of Calculating Costs 57
Reasons for Launching a Product that Doesn’t Cover Overhead 58
PART 4 FINE-TUNING YOUR PRICE 59
Chapter 9 Is Your Profit Potential Acceptable? 61
If You’re Happy with Your Potential Profits 61
If You’re Not Happy with Your Potential Profits 62
Next Step 66
Chapter 10 Psychological Adjustments to Your Price 67
Understanding “Barriers” in Prices 68
Staying below Barriers 68
Increasing Prices up to Barriers 69
Numbers that Say “Discount” to Buyers 70
Test Your Knowledge! 71
Visually Appealing Prices 72
Selling to Businesses 73
Learn More about Thresholds 74
Learn More about the Effect of Numbers 75
PART 5 TESTING YOUR PRICES 77
Chapter 11 Testing Prices 79
The Psychology of You—in Setting Prices 79
Can You Test? 81
The Difference between Testing and Research 81
Chapter 12 Using Google to Test Prices for Free (or Almost Free) 83
Two Methods for Almost-Free Testing!! 83
Using Google Optimizer to Test Multiple Things 87
PART 6 PRICING IN SPECIAL SITUATIONS 91
Chapter 13 Pricing Services 93
Imagine No Chapter 13! 93
The Complications of Setting Prices for Services 94
The Myth of Pricing Based on “What You Want to Earn” 94
Pricing by the Hours versus the Job 94
Finding What Service Competitors Charge 96
Picking Your Price Positioning 97
What Your Price Says about Your Firm 97
How to Charge Higher Prices to Those Willing to Pay More 98
Chapter 14 Pricing New Products/Services, Part 1: When Your Brand Is Unknown 101
The Problems in Pricing Something New 101
Price Equals Quality Buyer Perception 102
Does Quality Equal Likelihood-to-Buy? 102
Understanding “Bargain Hunters” 103
Price Preferences by Product Type 103
Detailed Research on Buyer Price Position Preferences 104
Additional Research on Preferred Prices 107
Learn More about Risk and Pricing 110
Chapter 15 Pricing New Products/Services, Part 2: Competing with Established Brands 113
When Your Competitors Are Established Brands 113
Risk Avoidance 116
Price Premiums for Known Brands 117
Discounting Differences 120
What Causes Customers to Switch to a New Brand? 124
What Happens after Buyers Switch? 126
Shocking Findings on Brand Names 127
So What Does it All Mean for Pricing a New Product/Service? 127
Chapter 16 Pricing with Discounts 129
Discounts: A Double-Edged Sword 129
When Discounts Worry Consumers 130
Determining Best Discount Levels 136
Discounts’ Effect on Quality Ratings and Purchase 137
Concluding Thoughts on Pricing, and Especially on Testing Prices 139
Appendix of Worksheets 141
Bibliography 157
About the Author 171
About the Companion Web Site 173
Index 175
