There are many different ways that business owners go about
trying to figure out what price they should use. Depending on the nature of
your business, you could try the following strategies...
• Evaluate product features and customer benefits
• Consider the size of your target market
• Evaluate your channel of distribution. High or low cost of
entry?
• Mark up x% over your cost of production
• Factor in your capital costs (ex., R&D, equipment)
over the expected volume/product life cycle
• Factor in marketing and overhead expenses, distribution
costs, sales commissions, discounts, and finally, of course, your desired
profit
• Undercut competitors’ prices
• Ask key (friendly) customers
• Consider the value perceived by your customer
• Get feedback from sales people
• Weigh typical customers’ “disposable income”
• Solicit advice from consultants or business associates
And if you simply mixed all these factors together and you
could come up with a “number” (i.e., price) that you hope proves to be
profitable. Right?
Wrong... unfortunately.
Even if you do every single one of the above, the data is
just too soft. Too imprecise. Too biased. But more importantly, it’s
incomplete. You still don’t know how the customer will react to your price.
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Pricing Isn't All Logic. Discover The Hidden Pricing Tactics You Can Use To Increase Profits!
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Sophisticated companies develop very involved spreadsheets
to factor everything in. They’ll use it to figure out the break-even point. A
price is set that covers all the variable expenses associated with that product
(cost of production, marketing, etc.) and a part of the company’s fixed costs
(ex., overhead). When enough units are projected at the right price, break-even
is achieved. Any price above that breakeven point is profit.
Here’s the flaw... they haven’t factored in customer value
satisfaction. The company has no idea how much the customer values the product
– how much it’s worth to him or her. If the company gets only half the volume
at a price that is, let’s say 10 % above break-even, what’s the point of that
beautiful spreadsheet?
Solution? Go to the source and ask…
A well-written online survey can give you the information
you need… directly from your prospective customers. They will tell you their
perceived value of your product and what they would be willing to pay for it…
as long as the wording of your questions attracts and encourages a response.
When you are preparing your survey, ask only for information
that is absolutely essential to the pricing process. The more questions you ask
on the Net, the fewer people answer.
Start with a list of questions that you would like to ask.
No need to censor yourself at this point. Think about your target customer and
let your creative juices flow. Once your list is complete, begin to weed out
the non-essential questions. It may take several rough drafts before you are
satisfied that you have identified the key ones. Develop questions that are
easy to understand and make your customer think clearly, yet easily. You want
to avoid lazy thinking and loose answers.
Your whole survey should look inviting and easy to answer…
the psychological keys to getting a response. Keep it short and to the point!
Formulating the questions for your survey will not be a
two-minute challenge. Figuring out what and how to say it effectively will take
time and effort… as you revise, delete, add, tweak until you get the wording
just right!
Why so much attention to a questionnaire? Your final
analysis relies on the strength and appropriateness of the questions you asked.
Poor questions… poor responses… poor results.
Make productive use of your time and your customer’s. Lay
the proper foundation, the first time.
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