The Dark Art of Pricing

Andrew Gregson

Description

This book will teach any business owner how to effectively price their products and services in order to make a profit, whether they're in retail, manufacturing, distribution, renovation, or custom building.
With few exceptions, most businesses use an outdated approach to pricing their goods and services. Whether they sell manufactured items, wholesale or retail or even provide financing, the conventional wisdom surrounding pricing was created in the late sixties and early seventies – a time when profit was evil.
The conventional wisdom is built upon following the lemmings, built on fear that customers will leave you if you charge too much, built on ideas that you can buy market share by being the low cost provider, built on notions that need to be swept away.
What is that conventional wisdom that stifles innovation in pricing? It has many faces like strict adherence to a notional margin number; like cost plus pricing; like customers buy on price considerations only. Successful companies are finding ways to break that mold.
Just look at the banks. They have done a terrific job of convincing us that the interest rate is the sole criterion for choosing a lender. But I can tell you that there are other considerations like the term, amortisation period, balloon payments, fees and renewals.The point of this book is to convince you to take an innovative look at your pricing strategy. You have been to sales training, correct? And you have paid attention to doing the job right, the first time? Well sales and marketing are the promise to the customer. Operations is the delivery of that promise. But pricing makes or breaks a bottom line.
What would happen if you could be the price leader and charge 25% more than your competitors? I know… Your first thought is that all your customers will head for the nearest exit. If that is your issue then you need to invest in your branding. Apple conducted an experiment that showed that if they raised their prices, only 20% of their customers would leave. Burberry, maker of luxury overcoats did the same and doubled their prices deliberately in order to lose 20% of their customers. But what if you could keep your pricing more or less the same and double your bottom line tomorrow by innovative use of pricing strategies?
Preface xv
Introduction: Why Is Pricing Important? xvii
1 The Quick Fix 1
2 How to Present Your New Prices
(Or, How to Sell Your Dream Price) 3
1. Prepare for Sticker Shock 3
2. Deal with Objections You Know about Early and Head-on 4
3. Keep Your Price to the End 4
4. Start with a Big Ask 4
5. Frame Your Price 5
6. The Power of Ten 5
7. Paint a Picture in Vivid Primary Colors 6
8. Make the Customer Open, If You Can 6
9. Make the Buyer Work Hard 8
10. Sandwich Your Price between the Benefits 8
11. Try to Make Your Price Nonnegotiable 9
12. The Cost Penalties of Not Buying 9
vi The Dark Art of Pricing
13. Don’t Squeeze Too Hard Against the Weaknesses 9
14. Let the Customer Win Something 9
15. Laugh Your Way to Your DREAM Price 9
16. Don’t Email 10
17. Price in Ranges 10
18. Be Persistent 10
3 Pricing for Start-ups (and Beyond) 13
1. Provide What the Market Wants; Don’t Start by Finding a
Market after You Have Made the Product 14
2. Customer-Driven Pricing 14
3. It Is Not about Sales, It Is about Profits 16
4. Customer Loyalty and Its Role in Your Pricing 17
5. Choice and Niche Markets: A Profit Opportunity 20
6. Price in Threes (a.k.a., Good, Better, Best Pricing) 21
7. Decision Fatigue: Analysis Paralysis and Its Role in Pricing 22
8. Bad Customers Drive out Good Customers 26
9. Wrapping It All Together 28
4 Positioning for Price
(The Role of the Unique Selling Proposition) 29
1. How Do You Use a Unique Selling Proposition? 29
2. Step 1: Dissect Why You Originally Decided to Sell
Your Widgets or Services 30
3. Step 2: Unearth Those Customer Benefits 32
4. Step 3: Analyze Your Customer 33
5. Step 4: Examine the Customer Cost Variables 34
6. Step 5: Use the Power of Ten 35
7. Step 6: Make the Customer’s Choice Easy 36
8. Step 7: Exploit Perceived Value 37
9. Step 8: Who and When Is Your Customer? 37
10. Step 9: Think Like a Customer 38
11. Using your USP to Position for Price 39
5 Value Pricing 43
1. What Is Value Pricing Exactly? 44
2. Applying Value Pricing: Pricing on Purpose 46
Contents vii
3. Value Pricing Is Tip Pricing 46
4. Value Pricing Is Tip Pricing: Accounting 48
5. Value Pricing for Distributors 49
6. Pricing for Value 49
6 Pricing and Branding 51
7 Pricing Strategies Based on Customer Behavior(s) 55
1. Reference Pricing 55
2. Proportional Price Evaluations 57
3. Perceived Fairness 58
4. Price Dripping 59
5. Gain-Loss Framing 60
6. Gender Differences in Pricing 60
7. Prospect Theory 61
8. Using Customer Behaviors to Benefit Your Profits 62
8 The Failure of Conventional Pricing 65
1. WAG, SWAG, and STICK Methods 65
2. Cost-Based Pricing 67
3. Margin Pricing 68
4. Risk and Return 69
5. Don’t Be Afraid to Charge What You Are Worth and
Change How You Do Things 72
9 Successful Pricing Strategies 75
1. Price Optimization 75
2. Seven Questions for Price Optimization 76
3. Optimizing Pricing for Limited-Time and/or
Limited-Inventory Offers 76
4. Activity-Based Costing (ABC) and Activity-Based
Pricing (ABP) 77
5. Dynamic Pricing (Surge Pricing) 80
6. Data and How It Gets Used to Generate Profits 82
7. Price Skimming: Lessons in Pricing from Apple 83
8. Pocket Price Banding 84
9. Bundling and Unbundling 85
10. What Now? 87
viii The Dark Art of Pricing
10 Retail Pricing 89
1. The Most Effective Pricing Strategies 90
2. Discounting and Sales 91
3. Steps in Promotional Discount Pricing 92
4. Going from Analysis to Action: Implementing
a Price Increase 92
5. Price Lining 96
6. Odd Pricing 97
11 Pricing Conclusions and Steps to Profit 101
1. Sell Your Price and Reap the Benefits 101
2. Stop Discounting: It Kills Profits 101
3. Cut Your Price Waterfall Costs 102
4. Spend Time Developing Your USP and Branding 102
5. Pay Obsessive Attention to Customer Service and Quality 102
6. Develop a System to Review Your Prices and
Apply Frequently 102
7. Build, Track, and Analyze Your Data 102
8. Keep Going 104
12 How to Price: A Workbook Approach 105
1. Step 1: Make a Decision to Position Your Company 105
2. Step 2: Pick a Niche Market 106
3. Step 3: Put Value First and State It 106
4. Step 4: Frame Your Price around Your
Competitors’ Prices 106
5. Step 5: Create Your Dream Price 107
6. Step 6: Collect Data 107
7. Step 7: Be Aware of Your Marketing Environment 110
8. Step 8: Don’t Be Afraid to Experiment 111
13 True-Life Business Scenarios 113
1. Pocket Price Banding: Castle Battery Company Case 113
2. GENERIC Truck and Diesel Ltd. “Re-setting the Clock” 117
Download Kit 123
Contents ix
Checklists
1 Optimized Pricing 77
2 Steps to Running Promotional Discount Pricing 93
Worksheets
1 Sell Your Price 12
2 Find the Minimum Viable Price 23
3 Develop Your Three Prices 24
4 Develop Your Unique Selling Proposition 40
5 Figure out Your Value 47
6 Position Your Price 73
7 Seven Questions for Price Optimization 78
8 Retail: How to Have a Sale 98
9 The Price Waterfall (or How Profits Drain away) 103
10 Strategic Considerations 109

Sujets

• Small business

Informations

• Publié par: Self-Counsel Press
• Date de parution: 15 octobre 2019
• Nombre de lectures: 0
• EAN13: 9781770405028
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

The Dark Art of Pricing
Deliberately Pricing for Profit
Andrew Gregson BA, MA, MSc (Econ)
Self-Counsel Press (a division of) International Self-Counsel Press Ltd. USA Canada

Copyright © 2019

International Self-Counsel Press All rights reserved.
Contents

Cover

Title Page

Preface

Introduction

Chapter 1: The Quick Fix

Chapter 2: How to Present Your New Prices (Or, How to Sell Your Dream Price)

1. Prepare for Sticker Shock

2. Deal with Objections You Know about Early and Head-on

3. Keep Your Price to the End

4. Start with a Big Ask

5. Frame Your Price

6. The Power of Ten

7. Paint a Picture in Vivid Primary Colors

8. Make the Customer Open, If You Can

9. Make the Buyer Work Hard

10. Sandwich Your Price between the Benefits

11. Try to Make Your Price Nonnegotiable

12. The Cost Penalties of Not Buying

13. Don’t Squeeze Too Hard Against the Weaknesses

14. Let the Customer Win Something

15. Laugh Your Way to Your DREAM Price

16. Don’t Email

17. Price in Ranges

18. Be Persistent

Worksheet 1: Sell Your Price: A Guide for Salespeople

Chapter 3: Pricing for Start-ups (and Beyond)

1. Provide What the Market Wants; Don’t Start by Finding a Market after You Have Made the Product

2. Customer-Driven Pricing

3. It Is Not about Sales, It Is about Profits

4. Customer Loyalty and Its Role in Your Pricing

5. Choice and Niche Markets: A Profit Opportunity

6. Price in Threes (a.k.a., Good, Better, Best Pricing)

Worksheet 2: Finding the Minimum Viable Price

Worksheet 3: Develop Your Three Prices

7. Decision Fatigue: Analysis Paralysis and Its Role in Pricing

8. Bad Customers Drive out Good Customers

9. Wrapping It All Together

Chapter 4: Positioning for Price (The Role of the Unique Selling Proposition)

1. How Do You Use a Unique Selling Proposition?

2. Step 1: Dissect Why You Originally Decided to Sell Your Widgets or Services

3. Step 2: Unearth Those Customer Benefits

4. Step 3: Analyze Your Customer

5. Step 4: Examine the Customer Cost Variables

6. Step 5: Use the Power of Ten

7. Step 6: Make the Customer’s Choice Easy

8. Step 7: Exploit Perceived Value

9. Step 8: Who and When Is Your Customer?

10. Step 9: Think Like a Customer

11. Using Your USP to Position for Price

Worksheet 4: Develop Your Unique Selling Proposition

Chapter 5: Value Pricing

1. What Is Value Pricing Exactly?

2. Applying Value Pricing: Pricing on Purpose

Worksheet 5: Figure out Your Value

3. Value Pricing Is Tip Pricing

4. Value Pricing Is Tip Pricing: Accounting

5. Value Pricing for Distributors

6. Pricing for Value

Chapter 6: Pricing and Branding

Chapter 7: Pricing Strategies Based on Customer Behavior(s)

1. Reference Pricing

2. Proportional Price Evaluations

3. Perceived Fairness

4. Price Dripping

5. Gain-Loss Framing

6. Gender Differences in Pricing

7. Prospect Theory

8. Using Customer Behaviors to Benefit Your Profits

Chapter 8: The Failure of Conventional Pricing

1. WAG, SWAG, and STICK Methods

2. Cost-Based Pricing

3. Margin Pricing

4. Risk and Return

5. Don’t Be Afraid to Charge What You Are Worth and Change How You Do Things

Worksheet 6: Position Your Price

Chapter 9: Successful Pricing Strategies

1. Price Optimization

2. Seven Questions for Price Optimization

Checklist 1: Optimized Pricing

3. Optimizing Pricing for Limited-Time and/or Limited-Inventory Offers

4. Activity-Based Costing (ABC) and Activity-Based Pricing (ABP)

Worksheet 7: Seven Questions for Price Optimization

5. Dynamic Pricing (Surge Pricing)

6. Data and How It Gets Used to Generate Profits

7. Price Skimming: Lessons in Pricing from Apple

8. Pocket Price Banding

9. Bundling and Unbundling

10. What Now?

Chapter 10: Retail Pricing

1. The Most Effective Pricing Strategies

2. Discounting and Sales

3. Steps in Promotional Discount Pricing

Checklist 2: Steps to Running Promotional Discount Pricing

4. Going from Analysis to Action: Implementing a Price Increase

5. Price Lining

6. Odd Pricing

Worksheet 8: Retail: How to Have a Sale

Chapter 11: Pricing Conclusions and Steps to Profit

1. Sell Your Price and Reap the Benefits

2. Stop Discounting: It Kills Profits

3. Cut Your Price Waterfall Costs

Worksheet 9: The Price Waterfall (or How Profits Drain Away)

4. Spend Time Developing Your USP and Branding

5. Pay Obsessive Attention to Customer Service and Quality

6. Develop a System to Review Your Prices and Apply Frequently

7. Build, Track, and Analyze Your Data

8. Keep Going

Chapter 12: How to Price: A Workbook Approach

1. Step 1: Make a Decision to Position Your Company

2. Step 2: Pick a Niche Market

3. Step 3: Put Value First and State It

4. Step 4: Frame Your Price around Your Competitors’ Prices

5. Step 5: Create Your Dream Price

6. Step 6: Collect Data

Worksheet 10: Strategic Considerations

7. Step 7: Be Aware of Your Marketing Environment

8. Step 8: Don’t Be Afraid to Experiment

Chapter 13: True-Life Business Scenarios

1. Pocket Price Banding: Castle Battery Company Case

2. GENERIC Truck and Diesel Ltd. “Re-setting the Clock”

Download Kit

Acknowledgments

About the Autnor

Notice to Readers

Self-Counsel Press thanks you for purchasing this ebook.
Preface

I have spent years consulting on profitability to small- and medium-sized businesses in North America. What I learned in doing this was that their experiences were not that different from my own, as I have started and owned five businesses, including two franchises. Many of these businesses struggled to generate enough wealth to make retirement for the owners a comfortable proposition. Far too many struggled just to pay the rent, payroll, or taxes. I know that they fought hard to try to be profitable, cutting fat and often slicing into corporate muscle to keep costs down.
Too often, the owners are the last ones to be paid.
Every business owner I worked with knew everything about the supply side of their business equation; they knew their sales processes and their costs. However, they could not grasp the other half of the transaction: the demand. In particular, how this applies to pricing and its role in profit and wealth generation.
I have called this book The Dark Art of Pricing because for many the process of determining price is akin to boiling eye of newt in a cauldron surrounded by wicked witches. Pricing is not magic, any more than selling is magic.
Finding the right pricing strategy is, like developing a sales program, work. It takes testing and tweaking. But the “how” and “why” are buried in corporate vaults and academic journals, almost inaccessible to the average business owner. My purpose in this book is to take those ideas and make them available to business owners so that they too can earn the profits they deserve.
This book builds upon the foundation I laid in my first book, Pricing Strategies for Small Business (Self-Counsel Press, 2008). After ten years of research and preaching that pricing is the last frontier of profit making, I needed to update my book with all that I have learned. Hence this book is more process driven and certainly grittier.
You will notice many references to my personal business experience in this book. When I lectured at Cape Breton University to MBA and BBA students, one of the attendees asked why I knew so intimately how pricing failed. My response was that I had made all the mistakes I talked about. Making mistakes is normal, but failing to learn from them is unfortunate.
What I wish for all business owners is that they find a way to charge what they are really worth, to drive larger profits, to build wealth, and to attract a buyer when the time comes to retire to a sandy beach. I hope this book helps them do just that.
Introduction: Why Is Pricing Important?

Pricing should be of the utmost importance to business owners because it is possible to use price strategies to engineer a deliberate profit.
You can drive sales and cut costs. Your accountant can tell you how to cut costs. Sales trainers can help you improve sales.
What is often mostly ignored is pricing, and pricing is, in my opinion, the final frontier of profit generation.
I tend to slam convention