Marketing is all about persuasion and using a psychological trigger to get someone to buy from you, can be very powerful. Maybe you're asking a prospect to take a free trial or to continue reading your copy but at some you are going to ask them to buy from you. Take a look at these prices for product XYZ:
a)$70.00
b)$69.99
c)$69.97
So which of the prices most appeals to you? It is obvious that anyone would choose lowest when presented with all three. However, if you were to test each price separately in your own campaign you would make many more sales at $69.99 and $69.97.
Testing has shown that more sales are made because we are drawn to the '6' rather than the '7', although there is only a small difference in the price in reality.
# Pricing Strategy 2 - Pricing on Demand
Whatever your costs and objectives are, the demand for your particular product or service will be of significant influence when setting a price. Where demand outstrips supply the seller finds it easy to charge higher prices. If you are in a high demand market it should be your objective to provide a good value for money product or service and not to overcharge customers.
Overcharging means they may not return for repeat business and losing customers after the first sale is not the way to long term profits for a home based business.
If you have a high demand product or service, but it is available from many other sources, building additional value into the proposition (not lowering prices) is the smart route to take to differentiate you and your business from competitors. You could offer:
a)Immediate delivery at no extra cost
b)Free Insurance on your item
c)A free bonus for acting quickly
d)A discount coupon off the next purchase
The idea is to build extra value into the deal that gives perceived added value to the customer and doesn't cost you much extra to provide in real terms.
# Pricing Strategy 3 - Competitor Pricing
Keeping an eye on your competitors and watching how they market, where they advertise and the prices they charge are all important. However, basing your prices to match or undercut a competitor can be very dangerous to your overall business and your profits.
In a very competitive market it is only by doing market research and asking your own customers that will you find out to what extent your customer shops around.
Many businesses overestimate this factor and usually end up charging less than they should. Research has shown that short term sales promotions often get quick results but do not contribute to a company's long term profits. There is a peak as soon as the SALE! SALE! SALE! Offer starts and then the sales graph flattens out.
The real answer is to survey your customers to get more accurate information rather than under-cutting competitors as a long term strategy.
What's the Difference then between Price and Cost?
There is distinct difference between the 'price' and 'cost' and you shouldn't let yourself get confused between the two.
* The definition of price is: The amount as of money or goods, asked for or given in exchange for something else (marketing).
* The definition of cost: The expenditure of something, such as time or labor, necessary for the attainment of a goal (accountancy).
Charge more not less and offer a better service, higher quality and the ultimate in customer service. Always have something that differentiates your home based business from that of your competitors and you will make money.
