Setting Profitable Prices: A Step-by-Step Guide to Pricing Strategy--Without Hiring a Consultant, + Website

Chapter 5

Pick the Positioning of Your New Product

In-a-Rush Tip

This chapter is critical. You need to read it all!

There Are Only 3 Choices!

There are only three positioning strategies for your prices—but enormous complexities within each.

Your options are only:

1. Lower than your competitors (penetration pricing)

2. Higher than your competitors (skimming pricing)

3. Roughly the same as your competitors (competitive pricing)

How do you determine the best price for your new offering? You must first understand the psychology of your price positioning.

Warning

Sometimes the best position is simply the one that is open. For example, if you’re planning to launch a new barbeque sauce and the competitors are all priced about the same, that tells you the best position for your new product may be premium priced. If lots of people are buying barbeque sauce, some of them are likely to pay an extra dollar for a better sauce. That extra dollar will cover your extra costs and give you a nicer profit margin. Plus when you launch, your unique selling proposition (USP) is easy and compelling: “Treat yourself to the BEST!”

The Psychology of Price Positioning

It is critical to understand what a price conveys to consumers about your product. One of the biggest mistakes you see with new marketers ...