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In this issue:
• Marketing Article: 7 Pricing Strategies That Improve Profit
• Marketing Article: Earning Your Customers Trust

7 Pricing Strategies That Improve Profit
by Bobette Kyle © 2007

Pricing strategies are a sometimes-overlooked part of the marketing mix. They can have a large impact on profit, so should be given the same consideration as promotion and advertising strategies. A higher or lower price can dramatically change both gross margins and sales volume. This indirectly affects other expenses by reducing storage costs, for example, or creating opportunities for volume discounts with suppliers.

Other factors also determine your optimal pricing strategy. Consider the five forces that influence other business decisions: your competitors, your suppliers, the availability of substitute products, and your customers. Positioning -- how you want to be perceived by your target audience -- is also a consideration. Price a premium item too low, for example, and customers will not believe the quality is good enough. Conversely, put too high a selling price on value lines and customers will purchase competitors' lower-price items. Some pricing strategies to consider are ...

Competitive pricing.

Use competitors' retail (or wholesale) prices as a benchmark for your own prices. Price slightly below, above or the same as your competitors, depending on your positioning strategies. Note you must collect competitor pricing information by observation rather than by asking them. Otherwise it could be seen as collusion, which is illegal in the U.S.

Cost plus mark-up.

This is the opposite of competitive pricing. Instead of looking at the market, look at your own cost structure. Decide the profit you want to make and add it to your costs to determine selling price. While using this method will assure a certain per-unit margin, it may also result in prices that are out-of-line with customer expectations, hurting total profit.

Loss leader.

A loss leader is an item you sell at or below cost in order to attract more customers, who will also buy high-profit items. This is a good short-term promotion technique if you have customers that purchase several items at one time.

Close out.

Keep this pricing technique in mind when you have excess inventory. Sell the inventory at a steep discount to avoid storing or discarding it. Your goal should be to minimize loss, rather than making a profit.

Membership or trade discounting.

This is one method of segmenting customers. Attract business from profitable customer segments by giving them special prices. This could be in the form of lower price on certain items, a blanket discount, or free product rewards. Bundling and quantity discounts.

Other ways to reward people for larger purchases are through quantity discounts or bundling. Set the per-unit price lower when the customer purchases a quantity of five instead of one, for example. Alternately, charge less when the customer purchases a bundle -- or several related items -- at one time. Bundle overstocks with popular items to avoid a closeout. Or, bundle established items with a new product to help build awareness.

Versioning.

Versioning is popular with services or technical products, where you sell the same general product in two or three configurations. A trial or very basic version may be offered at low or no cost, for example, with upgrades or more services available at a higher price.

Make smart use of these pricing strategies and your bottom line will soar!

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Bobette Kyle draws upon 15+ years of Marketing/Executive experience, online marketing experience, and a marketing MBA as inspiration for her writing. She is proprietor at the marketing plan and Website promotion site www.WebsiteMarketingPlan.com, where you can find more marketing strategy articles at: http://www.websitemarketingplan.com/techniques

Earning Your Customers Trust
by Richard Cannon © 2007

When agents claim they didn't earn the sale they thought they deserved, the reason is often because the customer had more trust in another vendor. In order to land most sales your client has to trust you and your judgment. Don’t you generally work with the people whose judgment you can trust? Why, because you know that the job will be done right. The same goes with you and your customer. Your customer needs to know that you are going to do the right thing for them. They need to trust that care about them.

I know that seems like a heavy card to hold but it is not as complicated as you may think. You have to, of course, know your product, and then determine exactly what your customer wants out of your product. Next you have to tell your client how what you’re selling can positively relate to their needs. If you put their needs first that will show you care about them. Don’t you tend to put more trust in people who put you first? When shopping for my computer my sales clerk asked me everything I wanted in my new PC, and he listened. He didn’t show me any thing I did not ask for. When he recommended other features I might enjoy I trusted his judgment. Those are the type of salespeople I like to deal with. Don’t you? Be one of those salespeople.

The best way to put this into perspective is to treat your client as a friend or family member. You would never sell them something that they would not benefit from, would you?

Another benefit to earning the trust from a customer is the credit they will give you. You will receive recommendations from that client. When you are recommended because of the trust a customer has in you, you win.

Go Get ‘Em!

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Richard Cannon, The TeleSales Recruiter started selling candy in school when he was 8 years old. He’s been selling ever since. In his 30’s he was looking for a sales job he could do from home that was in line with his purpose. He looked and looked and couldn’t find the right one. He swore some day he would make it easier for people to find great sales jobs they can do from home. He built a crew of work from home people, but couldn’t help everyone because they were not all passionate about what he was selling. So now, he assist’s salespeople in figuring out what their purpose is. Then he finds them an opportunity that is in line with that purpose. Now they make more money selling something they love. For more information, visit Cannon’s site at http://www.telesalesrecruiter.com