Groupon has taken the local deal market by storm, growing quickly to $2B in revenue (depending on how you define “revenue”). The local deals company has also created massive buzz and is now preparing for one of the largest IPOs in history. As a “pricing person”, I get a lot of questions from small business [...]
If your maximum price is determined by the perceived differential value of your offering, how do you know what value customers perceive. Many of them won’t tell you, especially if they think you’ll use that information to jack up the price. Here’s an example of a product that for many buyers has a really high [...]
As a small business owner, you don’t have big pricing departments or teams of PhDs with fancy algorithms to set prices. Pricing is often the last thing you want to think about (we’ll talk about why this is a big problem in another post). You want to put a price on a quote, website, menu, [...]
In my line of work, I encounter a lot of small business owners who set their prices by copying the “going price” in “the market” or by sticking their fingers in the wind. This is unfortunate, but fixable. What really frustrates me are when those same people, years down the road, are trying to figure [...]
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 [...]
