Product Pricing in 2018 – What Works Best?

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Pricing is a topic every business spends a lot of time thinking about. Whether you view it as an art, science or mix of the two, pricing is one of those things that can leave you scratching your head. Since we get the opportunity to speak with a variety of SMBs, we want to share our thoughts on the best way to approach product pricing in 2018:

Create Packages and Utilize Multiple Price Points

While there are entire blog posts written about specific topics like charm pricing, we want to focus on an overall strategy you can use for pricing just about any type of product or service. That strategy is creating differentiation by utilizing multiple price points.

The best way to understand the power of this strategy is by digging into a real example. Over the last few years, many non-fiction authors have realized they can earn much more than the average price of a book. They do this by building packages around the book they’ve written.

The first tier is the low price point. In this example, that may mean selling the book for $19 or $29. Then the second tier is the mid-price. This may be the book plus a value-added bonus, like video interviews, for a price in the range of $79. The last tier is the high price. This includes everything in the middle tier, along with a very high value offer like a 1-on-1 coaching session. The high package can easily garner a price tag of several hundred dollars. While offering three tiers is the most common approach, it can also make sense to have a total of four.

Now that we’ve covered a concrete example, take a moment and think of how this type of tiered pricing can make sense for what your business sells. One thing to keep in mind is there’s no right tier. Instead, utilizing this pricing strategy could make your product seem like an ideal fit for different types of consumers. When executed well, people will be incredibly happy with the value they get — regardless of which package or tier they choose.

3 More Product Pricing Tips

While creating packages and utilizing multiple price points could be enough to move the needle for your business, we want to share several more pricing tips that can help you make even more progress:

1. Focus on Value

Even though you obviously want to understand your product costs, your approach to pricing should be based around the perception of value instead of a simple markup equation.

2. Consider Credits Instead of Discounts

Although discounts can definitely get people to buy, they can also harm the long-term perception of your brand’s value. One way to get around this issue is to offer customers a “$20 credit” towards their first purchase instead of “$20 off.”

3. Understand Your Competition

Copying your competitor’s pricing is not a strategy for success. But you also don’t want to completely ignore them. Understanding your competition and how their offerings impact consumer views of your products will provide you with valuable pricing insights.

Posted on Monday, March 26th, 2018