Creative people love making things– widgets, software, knowledge, service calls. A lot of businesses and product lines get started this way. Someone has a cool idea to make something. Skeptics shoot down the idea. The founder or engineer makes it. Eureka! Triumph! Now, how to price it? At this point, you’ve done the hard work. [...]
A lot of businesses think they have a great product or service. Something above and beyond what the competition offers. But when it comes time to put a price on all this awesomeness, they are still cheaper than the competition. This is a particular problem for small, service-oriented businesses that try to compete with larger [...]
I was talking with a customer the other day about a new service his company has developed. It’s innovative and profitable, and they have found ways to reduce a lot of their costs to make it even more profitable. The customer asked when, “ethically”, he had to lower his price. As if answering his own [...]
I get a lot of questions about price optimization, so I just wanted to make it really simple. Write down your costs. Of course, you won’t know your real costs, so just use estimates, preferably from 2-5 years ago. These costs won’t include much nuance about fixed overhead, variable costs, service costs, customer acquisition, or [...]
How do you know when to stop asking questions about value? Couldn’t this go forever, asking “Why? Why? Why?” until we end up in a philosophical discussion? You want to ask questions until you no longer get meaningfully different answers. At this point, you know what you need to know. For example, suppose you want [...]
I try to avoid political commentary, but sometimes I just can’t avoid it. The airline industry has always been a tough place to make money, but since 9/11, terrorism fears, long delays in security, and surging oil prices have really made the market a place with little pricing power and lots of cost exposure. Pricing [...]
In a previous post, called Be Better, Not Cheaper , I talked about how important it is to differentiate elements of your offering other than just your price. Here’s a great example of executing that strategy from Austin and San Antonio-based Red Velvet Events. The big value drivers for her clients are increasing sales results [...]
Your price ceiling is limited by the Perceived Differential Value of your offering. Customers determine this, but you can help them along the way. Your price floor is limited by your costs. If your floor and ceiling are the same height, you are going to get squished. Never limit yourself on price. This is the [...]
If you’re reading this blog, you probably know the dramatic profit impact of small price improvements. (For a company running at 10% net margin, a 1% price improvement increases profit by 10%.) Yet even when companies want to improve pricing performance, they often feel like they are at the mercy of the market. If you’re [...]
I’m a big fan of analytics. And sports (although I no longer have time to keep up with them). So I’ve always been puzzled that with so much money and pride on the line, teams have done so little analyze data to help them win. Sounds a bit like pricing, right? There’s no shortage of [...]
