14 different ways to price your products or services

Source: http://www.thedesigntrust.co.uk/how-to-price-your-work-about-different-price-strategies-that-you-can-use/
Written by Patricia 5 Comments
Do you find pricing difficult? You are not the only one!
You might not know how to do the maths, or you find it hard to put a alue on your work and
skills !or a price la"el on your head!#, or you are worried a"out doing it right, $
%here are loads of different ways or strategies to price your products or serices, and often
creatie "usinesses use different price strategies at the same time& 'ere are the most common
ones that we hae found so far(
1. The cost price:
Do you know how much it actually cost you to produce your work, with all material costs and
hourly cost included? You really need to know this to identify your )"reak een point* where
your e+penditure will e,ual your income& -t will help you to avoid making a loss to manage
yourself better and "ecome more effectie and efficient with making more products or finishing
pro.ects in a shorter period of time&
-f you know your cost price you can then add a mark up or profit margin to calculate your price&
/ good starting point to calculate your cost price is to keep records of all your e+penditure and
also of all time spent per pro.ect&
-f you want more info a"out how to cost and price your pro.ects or how to calculate your daily
or hourly rate, then you might want to look at these "log posts&
!. The going rate:
Do you know what your competitors are asking or getting for similar work? %his is especially a
common price strategy if there are a lot of similar products or services on offer in a
competitive market !e&g& freelance graphic or we" designers#& -f you are too e+pensie or too
cheap you will loose out&
-f you don*t know the market rate, you will need to do some practical market research i&e&
check out prices on their we"site or with retailers, check with )people in the know* or middlemen
such as recruitment agencies or freelancers we"sites such as Elance or PeoplePerHour. You
might een want to go as far as doing some )ghost shopping* and contact them pretending to "e a
potential client&
". #undle price:
-t is ery common to offer a discount if buyers want more of your products or services at the
same time or if they "ook at the same time, to encourage them to "uy more& %his really is
helpful for your planning and cash flow&
0or e+ample( your daily rate can go down if clients "ook 12 days or more in adance, or you
offer a special deal if clients "uy earrings, necklace and a ring&
4. $redibility-building price:
3ometimes there are clients who you really want to work with, who are high4profile "ut hae
limited "udgets !e&g& in the cultural non4profit sector#&
You can decide to work for them for a lower or no fee, "ut - would strongly suggest that you get
something else in return than money% 5nsure that you work with the client to increase the
promotion and isi"ility around the work you do, and ensure that it "uilds on your credi"ility&
Discuss and negotiate in adance how these more interesting clients will help you to promote
you or gie you introductions to other !fee4paying# clients or hae good testimonials on your
we"site& You can learn more a"out how to improe your credi"ility in this "log post&
&. 'remium or prestige price:
/re you charging more to make your work look more e+clusie, "ased on your "rand,
positioning in the market and your target audience? %o "e a"le to charge these high prices, you
will need to proide e+cellent customer serice throughout the entire selling process, work with
the finest materials, and need to "e a"le to show your creatiity and e+pertise to achiee these
higher prices&
(. )*tra features price:
'ae you got similar products or serices at different price points within your range with e+tra
features?
0or e+ample a ring in gold or a ring in siler hae different prices, a ring with diamonds in the
same collection has a different price again& /ll three rings might "e ery similar, "ut due to
added features they get a different price&
-f you are proiding serices you can think a"out different )packages* that you offer at different
price leels&
%ip( this can really help if you want to decrease or increase your prices: change the material or
si6e!
+. 'sychological price:
-t is "etter to price your product to a )regular* num"er i&e& 785 instead of 7129,15&
:ut psychological pricing also refers to ; particularly in the gift market 4 the amounts
that customers are on aerage prepared to pay for wedding or gifts. 5specially department
stores are ery aware of this, e&g& the aerage price for a wedding gift to an ac,uaintance is 795,
so if your product would retail .ust a little "it a"oe this than that it will not "e stocked "y
retailers&
-f you sell to retailers then take into account their markups too& 3o if your cost price is 792, then
you will sell it to retailers for around 7<2, and they will sell it to consumers for "etween 7=2 ;
7192& %hat is psychologically a ery good price&
-f your cost price howeer would "e 799, then you would pro"a"ly sell it for around 7<5, then
making the retail price "etween 782 ; 71>5&
,. -iscounted price:
Do a sale at your studio if stock isn*t shifting, or offer cheaper rates in periods when you are
,uieter for e+ample ?onday morning or in @anuary&
.. /oss leader price:
%his is selling one serice or product "elow your cost price !so you are making a loss!# to attract
clients in the hope that they will actually spend more money once they are with you&
3upermarkets do this with "aked "eans, "read and "anana*s&
'oweer you might offer a free or highly discounted initial design consultation or something
similar to attract clients, and to start haing a meeting with a potential client where you can show
your e+pertise& %his can "e e*tremely effective in marketing terms 0to get a foot in the door1.
12. )mergency price:
-s your client in a pickle and do you know that you will hae to work many many hours deep into
the night to get the work deliered in time? You might decide to do the client a faour, or
consider to increase your hourly rate to compensate for the added stress.
/lso if you know that a client is going to "e )difficult*, then ensure that you communicate ery
clearly a"out what they can e+pect and "y when& -f you hae created with your client a clear
design "rief and ,uote then you will hae less issues a"out prices and e+pectations later on&
11. 3nternational prices:
-f you work internationally - would strongly suggest that you check out the local market.
3t is not 4ust the conversion rate that you need to check regularly !e&g& the :ritish Pound has
"een fairly olatile oer the last couple of months against the dollar and the 5uro#&
/lso check local prices and what your competitors charge locally as different markets can
differ hugely& When - work with Dutch designers - often suggest that they increase their prices
for the AB market !especially if they want to sell in Condon#, as their prices are too low in
caparison&
1!. 'ro4ect budget or fi*ed price for results:
5ften a pro4ect has a total given price which is often diided in different stages with
according fees i&e& >2D deposit upfront, 52D creatie stage, 92D deliery stage&
/ fi+ed price works well if you are efficient and e+perienced !you know how much time things
really take "y keeping clear time sheets oer the years#, you work with a more e+perienced client
!so you won*t "e wasting too much time hopefully in meetings, discussions and reisions# and
you work closely together at the "eginning to scope the pro.ect into a clear design "rief, and "oth
adhere ery strictly to deadlines&
-f the a"oe doesn*t apply then "e careful, and include at least 126 contingency in your
budget.
1". 7etainer:
%his is a recurring !monthly or ,uarterly# fee for a certain amount of often standardised work e&g&
a graphic designer "ooks a photographer for 9 days per month, eery month of the year, to ensure
a lower "ut relia"le rate&
:e aware( Eetainers can "e withdrawn at any time, unless a clear contract is in place&
14. 3t is a given:
3ometimes it is not up to you to decide the price, "ut the client or market decides!
%here is a gien price for a certain type of work e&g& the hourly rate of a freelancer with certain
skills, a daylong training workshop, or when there is a tender for a pu"lic commission&
-f the "udget is too low, then go "ack to the client with some counter offers, and suggest what
you can do for that gien "udget& Fery often clients hae a ery "ig list of what they want, with
a fairly small "udget& -t*s good to hae a conersation with them what they )must hae* or what
they would )like to hae*, and then propose what you can do for them at what price leel& You
will be surprised how negotiable many of these 0given1 price levels can be%

%he reality is that pricing is more of an art form than a mathematical e+ercise& -t ery often
comes down to where you want to position your work, and how confident you are in asking for
the right price&
12 Tips on 8ow to 'rice 9our 'roduct or Service
Source: http://voices.yahoo.com/12-tips-price-product-service-(1!(4.html:cat;&4
Article Explaining in Detail How to Accurately Price Your
Product or Service
It is important to make sure to have the perfect price for your product or service.
The goal with every company is to make proft. You may be wondering how much to
price your products or service. Here are ten tips on how to price your product or
service.
1& /lways mark up the price at least 122D more than what you paid for it& Your company needs
to make a profit so always make sure mark up the price at a minimum of 122D more than what
you paid for it& You can een mark up the price to >22D more than what you paid for it
sometimes&
9& 3ee what your other competitors prices are for each product or serice that is similar to your
company& You can see how much they charge to get a general idea of what price customers are
usually paying for each product& You want to hae your price range for each product or serice
somewhere in "etween the price range of other competitors unless your product or serice is
much "etter than others&
>& -s your company product or serice "etter than the other competitors? -f the products are "etter
than the others then make sure to mark up the price& You need to "e a"le to "ack up your prices
with reasons as to why your products are "etter& You need to gie them reasons how your
products or serice will "enefit them more than the competitor&
<& -s there any additional products or serices that your company can offer ? You hae an
adantage oer other competitors if they donGt currently offer an additional product or serice&
%here is another way that you can make more profit for your company "y haing een more
products or serice&
5& ?ake sure to check out which weekends that your competitor has sales or special deals& You
need to make sure that your company offers the same type of sales or special deals in regards to
products and serices that are similar& You want the customers to "uy a serice or product from
your company instead of your competitor&
H& You want to "ecome "etter than your competitor in regards to "eing a"le to proide e+cellent
customer serice along with serices and products offered& -t will help you get more profits if
you "ecome the "est company in the local area no matter what the product or serice may "e&
I& DonGt "e worried a"out your prices "eing too high for certain product or serice& Customers
are willing to pay a higher price for a "etter product or serice with the "est company in town
than they would with your competitors& Customers want to know that they are going to receie
the "est serice or product "y going with your company instead of the competitor& -t is a situation
where eeryone wins since your company will make more of a profit long term and the customer
is happy&
=& -t is important that your customers are happy& -f your customers are happy with your company
then they wonGt mind paying a little higher prices since they already like your company& You will
often get repeat customers and een more future customers from word of mouth& When your
customers are happy with your company products or serice including customer serice then in
return you will get repeat customers and een more future customers&
8& /lways make sure to "e aware of any new companies that may open up in the local area of
town& 3ome companies send their employees oer to the competitors store to look at the prices
and any other offers that a certain company may hae& :e alert a"out any new competitors and
watch out for any of their employees& 3ometimes they pretend to "e a customer& %his is important
to remem"er when dealing with prices&
12& %he num"er one top thing to remem"er in prices along with products and serice is to always
"e "etter than your competitor in eery way possi"le& You want to proide the "est customer
serice, the "est products, and the "est serice aaila"le in town& You want your company to
always hae happy customers and hae an e+cellent reputation&
'rice your product or service
Source: http://www.infoentrepreneurs.org/en/guides/price-your-product-or-service/
%he price you charge for your product or serice is one of the most important "usiness decisions
you make& 3etting a price that is too high or too low will 4 at "est 4 limit your "usiness growth& /t
worst, it could cause serious pro"lems for your sales and cash flow&
-f youGre starting a "usiness, carefully consider your pricing strategy "efore you start& 5sta"lished
"usinesses can improe their profita"ility through regular pricing reiews&
When setting your prices you must make sure that the price and sales leels you set will allow
your "usiness to "e profita"le& You must also take note of where your product or serice stands
when compared with your competition&
%his guide shows you how to "uild a pricing strategy and how to work out your costs and pricing
to make sure your "usiness is profita"le& -t also looks at different pricing tactics and changing
your prices&
The diference between cost and value
Covering fed and variable costs
Cost!plus versus value!based pricing
How to build a pricing strategy
"iferent pricing tactics
#aising or lowering prices
The diference between cost and value
Bnowing the difference "etween cost and alue can increase profita"ility(
the cost of your product or service is the amount you spend to produce it
the price is your fnancial reward for providing the product or service
the value is what your customer believes the product or service is worth to
them
0or e+ample, the cost for a plum"er to fi+ a "urst pipe at a customerGs home may "e J5 for trael,
materials costing J5 and an hourGs la"our at J>2& 'oweer, the alue of the serice to the
customer 4 who may hae water leaking all oer their house 4 is far greater than the J<2 cost, so
the plum"er may decide to charge a total of J122&
Pricing should "e in line with the alue of the "enefits that your "usiness proides for its
customers, while also "earing in mind the prices your competitors charge&
%o ma+imise your profita"ility, find out(
what benefts your customers gain from using your product or service
the criteria your customers use for buying decisions ! for eample$ speed of
delivery$ convenience or reliability
what value your customers place on receiving the benefts you provide
%herever possible$ set prices that re&ect the value you provide ! not 'ust the
cost.
overing fxed and variable costs
(very business needs to cover its costs in order to make a proft. %orking out
your costs accurately is an essential part of working out your pricing.
Diide your costs under two headings(
fxed costs are those that are always there$ regardless of how much or how
little you sell$ for eample rent$ salaries and business rates
variable costs are those that rise as your sales increase$ such as additional
raw materials$ etra labour and transport
When you set a price, it must "e higher than the aria"le cost of producing your product or
serice& 5ach sale will then make a contri"ution towards coering your fi+ed costs 4 and making
profits&
0or e+ample, a car dealership has aria"le costs of J1=,222 per car sold and total fi+ed costs of
J<22,222 a year that must "e coered& -f the company sells =2 cars each year, it needs a
contri"ution towards the fi+ed costs of at least J5,222 per car !J<22,222 diided "y =2# to aoid
making a loss&
Asing this structure, you can assess the conse,uences of setting different price leels(
if the car dealership sells cars at less than )*+$,,, -the variable cost per
car.$ it makes a loss on each car it sells and does not cover any of its fed
costs
selling +, cars at )*+$,,, means a loss of )/,,$,,, per year as none of the
fed costs are covered
selling cars at )01$,,, results in breaking even$ assuming the target +, cars
are sold -+, contributions of )2$,,, per car 3 )/,,$,,,$ i.e. the fed costs.
selling cars at )0/$,,, results in a proft$ assuming +, cars are sold -+,
contributions of )4$,,, 3 )/+,$,,,$ i.e. )+,$,,, over the fed costs.
if more or fewer than +, cars are sold$ profts are correspondingly higher or
lower
ost!plus versus value!based pricing
%here are two "asic methods of pricing your products and serices( cost4plus and alue4"ased
pricing& %he "est choice depends on your type of "usiness, what influences your customers to
"uy and the nature of your competition&
Cost4plus pricing
%his takes the cost of producing your product or serice and adds an amount that you need to
make a profit& %his is usually e+pressed as a percentage of the cost&
-t is generally more suited to "usinesses that deal with large olumes or which operate in markets
dominated "y competition on price&
:ut cost4plus pricing ignores your image and market positioning& /nd hidden costs are easily
forgotten, so your true profit per sale is often lower than you realise&
Falue4"ased pricing
%his focuses on the price you "eliee customers are willing to pay, "ased on the "enefits your
"usiness offers them&
Falue4"ased pricing depends on the strength of the "enefits you can proe you offer to
customers&
-f you hae clearly4defined "enefits that gie you an adantage oer your competitors, you can
charge according to the alue you offer customers& While this approach can proe ery
profita"le, it can alienate potential customers who are drien only "y price and can also draw in
new competitors&
How to build a pricing strategy
You need to decide whether to use cost4plus or alue4"ased pricing&
-tGs important to find out what your competitors offer and what they charge& -f you phone your
rials and ask them for a ,uote, you can use this information as a framework&
-tGs pro"a"ly unwise to set your prices too much higher or lower without a good reason& -f you
price too low, you will .ust "e throwing away profit& -f you price too high, you will lose
customers, unless you can offer them something they canGt get elsewhere&
%he perception of your product or serice is also important& -n many markets, a high price
contri"utes to the perception of your product as "eing of premium alue& %his might encourage
customers to "uy from you 4 or it might deter price4conscious customers&
-t can "e useful to charge different prices to different customers, e&g& to customers who purchase
repeatedly, or "uy add4on or related products, as a thank you for their loyalty& :ear in mind that
customers who are e+pensie to satisfy will "e less profita"le, unless you charge them higher
prices& Kne4off sales may cost you more than repeat "usiness&
You can also use pricing tactics to attract customers& 3ee the section "elow on different pricing
tactics&
Whateer prices you set, check that they coer your costs and can delier a profit& 3ee the page
in this guide on coering fi+ed and aria"le costs&
Diferent pricing tactics
Different tactics can help you attract more customers and ma+imise profits&
Discounting
Kffering specially4reduced prices can "e a powerful tool& %his could "e a clearance discount to
sell old stock, a discount for making multiple purchases of the same or similar products, or you
could offer "ulk discounts to encourage larger orders& You should "e a"le to make these more
profita"le through lower costs&
:ut "e careful& -f you discount too much, customers may ,uestion your full4rate pricing or see
you as a cheap option, making it difficult to charge full4rate prices in the future&
Kdd alue pricing
Asing the retailerGs tactic of selling products for J8&88 instead of J12 can "e useful if price is an
essential part of customersG "uying decisions& 3ome customers perceie odd alue prices like this
as "eing more attractie&
Coss leader
%his inoles selling a product at a low or een loss4making price& /lthough you may not make a
profit selling this product, you could attract customers who will also "uy other, more profita"le
products&
3kimming
-f you hae a uni,ue product or serice, you can sell it at a high price& %his is known as
skimming 4 "ut you need to "e sure that what you are selling is uni,ue&
Ktherwise you may .ust price yourself out of the market if there is credi"le competition&
Penetration
%his is the opposite of skimming 4 starting at a low price and gaining market share "efore
competitors catch up with you& Knce you hae a loyal customer "ase, you should "e a"le to find
ways to raise prices later
"aising or lowering prices
%here will "e times when you need to change your prices& :ut "efore you do, you should analyse
the impact on your profita"ility of any proposed price change&
%here are two key ,uestions you will need to answer(
%hat efect will the price change have on the volu#e of sales5
%hat will the efect be on the proft per sale5
-ncreasing prices
-ncreasing prices can improe your profita"ility een though your sales olume may drop&
-f you are increasing your prices, always e+plain to your customers why you are doing it& You
can use the price change as an opportunity to re4emphasise the "enefits you offer& / good
e+planation can also strengthen your relationship with a customer&
%here are also ways that you can hide price increases& 0or e+ample, you might(
introduce new$ higher!priced products or services and make older$ cheaper
ones obsolete
lower the specifcation ! and your costs ! while maintaining the same price
:ut "e aware that hiding price increases can risk aderse reactions from customers if they realise
what you are doing&
Eeducing prices
You should neer take the decision to lower prices lightly& Cow prices often go hand4in4hand
with poor4,uality serice 4 is this the image you want to create for your "usiness?
Concentrate on "uilding profits rather than cutting prices to "uild up sales& -n most
circumstances, your customers decide to "uy from you "ecause of the "enefits you offer, along
with your price& -t is rare for the decision to "e made "ased solely on the price&
Kriginal document, Price your product or service, L Crown copyright 9228
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