4 tried and tested ways to ensure you master the science of pricing…
Mastering the science of pricing and applying it to your business is a source of far greater profits. McKinsey, the global consulting firm, suggest that pricing has a bigger impact on your profits that anything else.
Every business owner who is serious about profit growth should be equally serious about the science of pricing
1. Collect 3-tier pricing examples. Don’t just use guesswork, it isn’t enough, some of the most successful companies in the world use 3-tier pricing. Look for examples from EasyJet, TripAdvisor and Starbucks. You may even find an example of bottom up pricing used by BMW to show that in some cases this can work too.
2. Build a ‘pretend’ tiered pricing offer for your business. This should be in line with the pricing you have in place now (unless it is something you have never addressed) but have pricing anchors in place and offer one or two different pricing tiers for your business, the key is to have a top, middle and bottom price, it is proven that buyers feel more in control if they have options to choose from. No-one likes ‘Hobsons choice’
3. Test and measure with real-life buyers. This is very important, as you will never be able to know if it works or not, so do not be afraid to get it wrong and do not be afraid of criticism, all feedback is good and it will allow you adjust, improve and move forward. Only when you test your pricing options will you discover which options deliver the best profits for you and your business.
4. Keep testing. Make price testing something your business does regularly. Once you have arrived at a tiered system you are happy with, don’t rest on your laurels, keep testing it, changing it and making the necessary adjustments to keep your pricing sharp, your buyers in control and happy and you one step ahead of the competition