Price For Success
By W. Lee Steele
Everyone is familiar with the traditional fixed unit pricing method (e.g., $2 per box or $5.95 per bottle). Did you know there are at least 10 alternative ways to price your products and services? Each of these alternative-pricing strategies can be used to help you achieve specific sales and marketing goals. Here are six creative ways to price your products and services:
Volume Pricing: The more a customer buys per order, the lower the price per unit. This pricing strategy incentivizes the customer to increase his/her order each time he/she buys. This strategy can also be used on an annual or cumulative basis to encourage customers to place repeat orders with you throughout the year to earn additional discounts or incentives (like Frequent Flyer miles) as his/her total year-to-date purchases increase. This pricing strategy helps to maintain customer loyalty over a long period of time.
Multi-Pack Pricing: This pricing strategy involves selling multiple units of the same product in one package for one price (e.g., six-packs of beer or soft drinks). This strategy accomplishes 3 objectives: It increases the average number of units purchased per sale, it leads to increased product usage, and it minimizes the customer’s exposure to competitive offers (by keeping them “out of the market” over a longer period of time).
Multi-Product Pricing: This pricing strategy involves selling different, but complementary, products in one package for one price (e.g., a combo pack of shampoo and conditioner, or a combo pack of a toothbrush & toothpaste). This strategy encourages customers to buy your brand for both products (increasing the average order size) and helps to expose customers to more of your products.
Cross-Promotion Pricing: This strategy involves offering a discount on a different second item when a featured first item is purchased at regular price (e.g., “Save 20% on our selected sweaters when you purchase a leather jacket at regular price”). This strategy encourages customers to buy your brand for both products (increasing the average order size) and helps to expose customers to more of your products.
Time-related Pricing: The price a customer pays depends upon when they buy it. For example, to encourage early orders, you can offer: “Buy before November 1 and save 15%.” Or, to encourage additional repeat orders, you can offer: “Place your next order within 90 days and save 15%.”
Pre-paid Pricing: This pricing strategy requires customers to pay up-front for the product or service in return for a significant savings (e.g., long distance telephone cards). This strategy encourages customers to “buy now, use later.”
There are, of course, many other useful pricing strategies, including Pre-Season Discounts, Subscriptions, Cost Plus, and Contractual/Negotiated pricing. If you want your customers to “buy early, buy often, buy more”, then select the right pricing strategy to help you achieve your specific sales and marketing goals. Get creative, and “price for success.”
W. Lee Steele is the President of Strategic Insight, Inc., a marketing consulting firm based in Tempe, Arizona. Mr. Steele can be contacted at leesteele@strategicinsight.com .