Profitable Pricing

Prevent profits slip sliding away by mastering the art and science of pricing.

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Update 1

Can a 1% price increase really deliver an 11% profit increase

It is proven that the fastest and most effective way for any business to realise its maximum profit is to get its pricing right. The right pricing structure can boost profit faster than reducing costs or increasing your sales volume, on the flip side the wrong pricing structure can shrink your profits just as quickly.

Update 2

Studies prove that pricing has the biggest influence on the profits of your company

Two studies by McKinsey & Co and A.T Kearny (both global consulting firms), suggest that pricing has the biggest influence on the profits of your company.

With such extreme profit leverage pricing is one area that a company can always improve, it is, in a nutshell too important to ignore or treat lightly.

Please click here to read the details of these studies.

Just think – what impact could better pricing have on your bottom line profits?

Update 3

Do you assume ‘the price is right’?

Many business owners are guilty of believing their current pricing process needs no review, they are reluctant to investigate initiatives to improve price for fear that they will alienate, frighten or lose customers. The result of not managing price performance however is far more damaging. Getting your pricing right is one of the most fundamental and important functions for any business manager and should be the first job undertaken. Read here to learn that providing your buyers with well thought out and carefully planned pricing options gives you a competitive advantage.

Update 4

Take control of pricing and give control to your buyers

We all like choice, too much choice can be mind boggling and overwhelming but we also don’t want to be offered just one choice, we like to feel in control, like we have made the decision and had the tools to make the right decision, this gives us a sense of power and ownership of the final decision that we have reached and invariably means that we are happy and satisfied with the outcome.

This is especially important when you are buying and even more important when you are selling. Read here how giving your buyers control of the pricing options can dramatically improve the success and profits of your business.

Update 5

No-one likes an option of one, provide successful pricing options and watch your profits soar

No-one likes to hear the phrase ‘you can have any colour you want, as long as its black’ This is called ‘Hobsons choice’, we resist ‘Hobsons Choice’ as it is very much ‘take it or leave it’ and it removes our sense of control.

Knowing this, why would you want to offer a buyer just one price. Providing your buyers with a carefully structured, measured and testing pricing plan will give them more control and you a competitive advantage.

Update 6

In the 21^st century buyers want pricing choices, give your buyers back control

In the 17^th Century Thomas Hobson ran a carrier and horse rental business in Cambridge, England. Hobson rented out horses, mainly to Cambridge University students, but refused to hire them out other than in the order he chose. The choice his customers were given was 'this or none'; quite literally, not their choice but Hobson's choice. We resist ‘Hobsons Choice’ because of a deep rooted need within us all to feel a sense of control, that we are the decision maker not ‘Hobson’, that what we have chosen was exactly what WE wanted not because that was all that was available. This is why the way you price your products and services can have a massive impact on the growth and profitability of your business, give your buyers options, choices and allow them to make the decision. They win and so do you!

Read here how control for the buyer is at the heart of the pricing process.

Update 7

The path to profits through pricing does not have to be difficult

Pricing does not have to be complicated, in fact if it is your buyers will lose interest as they struggle to understand the process and the format of your pricing system.

How you price your products and services can have a radical impact on the revenue you make.

Searching for the perfect pricing model can be difficult and initially you may get it wrong. In fact, to eventually succeed your model MUST be tried and tested.

3-tier pricing options give your customers more choice, instead of choosing between you and a competitor, you’re allowing them to choose between you and you. Make your pricing options work for everyone.

Update 8

Learn from the some of the best companies in the world, tiered pricing can influence your profits in a way you never thought possible.

It is hard to guess what a buyer will pay, offering one price gives you one guess, which could be wrong, offering 3 prices and your odds improve. Offering pricing options is logical, yes? as different people will pay different prices, improve your odds by offering options.

The object is to make your business better, don’t wait any longer to tier your pricing, otherwise, you are leaving money on the table.

If companies like Trip Advisor, EasyJet and Apple believe that tiered pricing is the way forward can you really refuse to ignore it.

Read here to learn how top-down 3-tier pricing can make a real difference to your bottom line.

Update 9

Create real value for the buyer through 3-tier pricing options

People want to know they’re getting the most bang for their buck. By allowing your buyer to pick a price for a product or service for themselves – one that includes what they want at a price they prefer – you create a sense of maximized value, they feel in control of the decision they are making and therefore ultimately will be happy with the price they are paying. Try a new 3-tier, top down pricing structure now and see the rewards for your business.

Update 10

Use pricing anchors to provide real value and choice to your buyers

We depend on anchoring every day to predict the outcome of events, to estimate how much time a task will take, how long it will take to get somewhere or how much money something will cost. When we need to choose between options it’s preferable to have an estimate or approximate value. That’s why pricing anchors are so important to buyers, everyone needs starting points and if done effectively anchoring can be included in a pricing structure without the buyer even realising. Read more here on the effectiveness of pricing anchors to tiered, top-down pricing structures.

Update 11

Use pricing anchors to make top-down, 3-tier pricing work for your business

When you understand the value of pricing anchors, you can then see how important they are in tiered pricing and how top-down pricing can be used very effectively to demonstrate to your buyer that you have provided different versions of the same product at different prices, while subtlety driving them towards to price you want them to pay. For more information on the effectiveness of pricing anchors in 3-tier, top down pricing please click here

Update 12

Use pricing anchors to ensure maximum profitability in your business

Anchoring is profoundly important to ensure that your pricing increases your sales and profits. Tversky and Kahneman (Nobel prize winners on this subject) rigged a carnival wheel of fortune to show only a 10 or 65 and then asked very specific questions to the players. The results demonstrate the power of anchoring to a higher figure as 45% of the people that had seen the wheel land on 65 provided answers nearer to this number. Read more on this example and try the fun games in the downloadable tools on the link in the blog and you will prove to yourself and the group you work with, the simple and effective power of anchoring.

Update 13

Mastering the science of pricing and applying it to your business is a source of far greater profits.

McKinsey, the global consulting firm, suggest that pricing has a bigger impact on your profits that anything else.

Every business owner who is serious about profit growth should be equally serious about the science of pricing.

Update 14

There is no right and wrong to mastering the science of pricing, the key is to have a go.

Here are 4 helping hands for you and your business to master the science of pricing

Collect 3-tier pricing examples

Build a ‘pretend’ offer for your business

Test and measure with real-life buyers

Keep testing. Make price testing something your business does regularly.

Update 15

Take pricing seriously and turn a jog to profits into a sprint.

When you take pricing options seriously you may stutter and stall along the way, this is perfectly normal, but only when you start testing customer response to different pricing options will you discover which options deliver the best profits for you and your business.

Update 16

Pricing, don’t avoid the subject it could take your business to new heights

Pricing can be a difficult subject to tackle and even more difficult to get right, both for a multi-million-pound company or the local hairdresser on the high street. Buyers are now more savvy, they have more options, they can very easily compare your price to the competition and therefore their expectations are much higher. However, to not even try to get your pricing right will mean that you never tap into the higher profits your business could be generating.

Update 17

There are always things to be learnt about the subject of pricing, even if you think you know everything.

In his brilliant book Priceless – The hidden psychology of value, William Poundstone has done a fabulous job of pulling together some of the best science about pricing.

He recognises pricing as a much richer subject than most people imagine and provides a truly eye opening account of how the pricing of products affects how we think of them.

Poundstone shows how behavioural decision theory has revolutionised the pricing strategies of major corporations. The book also includes many fascinating behavioural experiments and is packed with real life examples of why pricing is so important and the tricks that companies use to sell their products and services.

Update 18

Question, test and implement your pricing processes, only then will you see the maximum gain for your business.

How do you know if you are making the most profit from the current pricing structure you offer your customers? When did you last review the way you price your products and services. How do you know if you if your current pricing structure is delivering the maximum profits to your business? In this Business Bitesize you will find all you need to navigate the minefield that is pricing.

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1) How seriously do you take your pricing… are you guilty of believing your pricing structure needs no review, read how 2 studies suggest that pricing has the biggest influence on your profits.

2) Is it true that a 1% price increase can deliver an 11% inflation in your business profits?

3) Do you ever wonder how much profit you’re missing out on by ignoring the science of pricing, could pricing be the most important thing to get right?

4) No-one likes the phrase ‘you can have any colour as long as its black’ give your buyers more than ‘Hobsons choice’ with your carefully structured pricing process

5) Have your buyers coming back for more by putting them in control of the price they pay

6) Pricing options make your buyers feel in control, give you the competitive advantage and can seriously boost the profits of your business

7) 3-tier, top-down pricing is something that some business owners seem hesitant to embrace, but read here what tiered pricing has done for some of the most successful companies in the world, can you really afford to wait to address your pricing process?

8) 3-tier pricing options give your customers more choice, instead of choosing between you and a competitor, you’re allowing them to choose between you and you. Make your pricing options work for everyone.

9) People want to know they’re getting the most bang for their buck. By allowing your buyer to pick a price for a product or service for themselves – one that includes what they want at a price they prefer – you create a sense of maximized value. Try a new pricing process now and see the rewards for your business.

10) Read how the use of pricing anchors, if used correctly and effectively can severely increase sales and profits

11) By using pricing anchors you can unlock the power of pricing profits

12) Pricing anchors provide real solutions to pricing options

13) Every business owner who is serious about profit growth should be equally serious about the science of pricing. Make sure your pricing plan works for you and your buyers.

14) Offering one price gives no sense of control to your buyer, offer carefully tested and measure pricing options and give your buyer the freedom to decide for themselves.

15) Giving your buyer top-down, 3-tier pricing so they feel in control means that they are more likely to buy from you and keep buying from you, here are 4 ways to ensure you get it just right!

16) For fascinating insights into mastering the science of profitable pricing and applying it to your business click here

17) William Poundstone’s book Priceless: The Hidden Psychology of Value is a book essential to any business owner tackling the murky waters of pricing

18) All you need to do is take the science of pricing seriously, then take the testing and implementation seriously and the gains will be evident in the profit you make

Blog Posts

BLOG 1 - Can a 1% price increase really deliver an 11% profit increase?

And yet many business owners are still reluctant to investigate initiatives to improve price for fear that they will alienate, frighten or lose customers. The result of not managing price performance however is far more damaging. Getting your pricing right is one of the most fundamental and important functions for any business manager and should be the first job undertaken.

Two studies by McKinsey & Co and A.T Kearny (both global consulting firms), suggest that pricing has the biggest influence on the profits of your company.

Please click here to read the details of these studies.

Just think – what impact could better pricing have on your bottom line profits?

BLOG 2 - Make the right pricing choice and give your buyers a sense of control

We all like choice, too much choice can be mind boggling and overwhelming but we also don’t want to be offered just one choice. We like to feel in control, like we have made the decision and had the tools to make the right decision, this gives us a sense of power and ownership of the final decision that we have reached and invariably means that we are happy and satisfied with the outcome.

This is especially important when you are buying and even more important when you are selling.

Read here to learn about Thomas Hobson and why giving your buyers pricing options will radically improve your businesses profits.

BLOG 3 – Mastering the science of top-down 3-tier pricing can seriously boost your business profits

Pricing does not have to be complicated, in fact if it is your buyers will lose interest as they struggle to understand the process and the format of your pricing system.

How you price your products and services can have a radical impact on the revenue you make.

Searching for the perfect pricing model can be difficult and initially you may get it wrong. In fact, to eventually succeed your model MUST be tried and tested.

The object is to make your business better, don’t wait any longer to tier your pricing, otherwise, you are leaving money on the table.

If companies like Trip Advisor, EasyJet and Apple believe that tiered pricing is the way forward can you really refuse to ignore it?

Read here to learn how top-down 3-tier pricing can make a real difference to your bottom line.

BLOG 4 – How can you help keep your business afloat with pricing anchors?

Anchoring is profoundly important to pricing for profit. Here’s why…

A product is never really ‘cheap’ or ‘expensive’ it’s all relative. People like to compare prices when deciding on a purchase. If you are out shopping for a Television, you will look at the different models and compare the prices and the specification of each.

One might be 55 inches and cost £1500 while the other might be 52 inches and cost £1000, so you would probably think that the 52-inch TV is the better value option given that the difference is only 3 inches, this is exactly what the store you are purchasing it from want you to think. You have inadvertently anchored yourself to the £1500 TV so that the £1000 TV looks like really good value alongside it.

When you understand the value of pricing anchors, you can then see how important they are in tiered pricing and how top-down pricing can be used very effectively to demonstrate to your buyer that you have provided different versions of the same product at different prices, while so subtlety driving them towards to price you want them to pay. For more information on the effectiveness of pricing anchors in 3-tier, top down pricing please click here.

BLOG 5 – 4 tried and tested ways to ensure you master the science of pricing

Mastering the science of pricing and applying it to your business is a source of far greater profits. McKinsey, the global consulting firm, suggest that pricing has a bigger impact on your profits that anything else.

Every business owner who is serious about profit growth should be equally serious about the science of pricing

Collect 3-tier pricing examples. Don’t just use guesswork, it isn’t enough, some of the most successful companies in the world use 3-tier pricing. Please see our downloadable tools for examples from EasyJet, TripAdvisor and Starbucks. We have even included an example of bottom up pricing used by BMW to show that in some cases this can work too.
Build a ‘pretend’ tiered pricing offer for your business. This should be in line with the pricing you have in place now (unless it is something you have never addressed) but have pricing anchors in place and offer one or two different pricing tiers for your business, the key is to have a top, middle and bottom price, it is proven that buyers feel more in control if they have options to choose from. No-one likes ‘Hobsons choice’
Test and measure with real-life buyers. This is very important, as you will never be able to know if it works or not, so do not be afraid to get it wrong and do not be afraid of criticism, all feedback is good and it will allow you adjust, improve and move forward. Only when you test your pricing options will you discover which options deliver the best profits for you and your business.
Keep testing. Make price testing something your business does regularly. Once you have arrived at a tiered system you are happy with, don’t rest on your laurels, keep testing it, changing it and making the necessary adjustments to keep your pricing sharp, your buyers in control and happy and you one step ahead of the competition

BLOG 6 – Here's how to make your pricing structure irresistible to your customers and maximise the profits of your business...

In his brilliant book Priceless – The hidden psychology of value, William Poundstone has done a fabulous job of pulling together some of the best science about pricing.

He recognises pricing as a much richer subject than most people imagine and provides a truly eye opening account of how the pricing of products affects how we think of them.

It’s a book every business owner and manager should read and start testing the insights. To read more about the book and the power of profitable pricing then please click here

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