Pricing Strategies Help..

[santiago]

I own a business in which we are able to sell a finite amount of items. Somewhat like an airline with airline seats. It costs us a fixed amount to operate and the more we do, our profit goes up, but we have a limit. This is a service that when my consumers need it, they generally need it pretty quick. My gut tells me they don't price shop a whole lot, they just need it now.

That said, at our current pricing we are a little below market and only sell about half of of our inventory (again, think airline seats). Economically, my thinking is lower our price even more and fill up those "seats". However; on the flip side - perhaps we should raise our prices, people will percieve a more quality product.

Bottomline, of course, is I want more revenue.

I'm at a loss pricing wise, any ideas?

 

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[andviv]

I'm not expert at all in this topic, but your description of your service/product makes me think about selling "memberships" or "frequent buyer" programs. That way you raise prices for "regular" customers but then offer special pricing for repetitive/loyal customers. Would that work on your line of business?

 

[santiago]

thanks for the reply - wouldn't work for individuals, but our biz is about 50% businesses which as a whole use us regularly..

 

[MrPink]

I have given this issue a lot of thought, but still don't know what is the right thing to do - and probably depends on the exact product. Have you considered making the use free and selling advertising on the site?

Mr. Pink

 

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[CactusWren]

Hello,

With pricing I can never think that lowering the price is a good idea. It's just too related to value and perception, not to mention that its usually a loosing proposition.

What I recommend:
- check out the competition
- price based on industry gross margin averages (can be found in Encyclopedia of Global Industries: galenet.galegroup.com)
- run tests (like try eBay)
- if you are internet based try different prices and measure and test

But most important promote, promote, promote as it sounds as you already have it "right" selling 1/2 of your product so just find more customers.

good luck!

 

[Jito]

Hard to comment without more information. There is a lot of thought that should go into pricing products/services.

 

[australianinvestor]

Maybe you could test your pricing. Charge a third of your customers a low price, charge a third of them a high price, and leave the remaining third at the current price. You can then calculate how much a $1 increase in price affects volume and profit. With this, you can make a model which you can use to test effects of desired prices. Once you know which price produces the best profit for you, use that.

This is obviously simplified, but I'm sure you see what I'm getting at.

Alternatively (and outside the scope of your question), you might be able to charge the highest price in the market and become the premium dealer (although, if your service is like airline seating, it's almost like a commodity, so this may not be appropriate).

Daniel.

 

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[santiago]

thanks for the responses guys - lots of help. I really haven't given a lot of thought to pricing other than what do our competitors do. Also, I realize pricing is just one component of marketing and I definitely need to work on the other areas as well..

 

[dbeck29]

like others have said, its hard to gauge with out knowing finer details. Just always remember, people, all people, want to feel special. Is there any incentive you can offer to your clients that is outside your industry box? Can you offer a different service or product that will compliment your current product/service? Can you team up with another company and combine your services to create a "total package?" Just some things to think about? As for pricing, unless you have a real tight industry which one can get the exact same item and service for a cheaper price, i would not lower your price. Remember, when you lower your cost, its obviously more difficult to ever raise it, not to mention, like you said, lower cost is always associated with lower quality.