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

Chapter 7

Picking a “Ballpark” for Your Best Price

In-a-Rush Tip

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

In this chapter, we start to winnow down the pricing choices to a range that would be most effective for your new product or service.

To do this, look at your Competitor Pricing Worksheet (Chapter 3) and your Buyer Benefits Worksheet (Chapter 6) in this book’s Appendix. Then visit the companion web site, download/print out the worksheets, and put them beside your computer.

The key decision for this chapter is the price position you want to have. Your choices follow. If you have questions on which to select, review the three positions in greater detail in Chapter 5.

• Penetration Pricing
  • Use penetration pricing if your costs are definitely 30 percent or more lower than your competitors—and it would be hard for them to match your costs.
  • Use penetration pricing if you want to be one of the cheaper products on the marketplace.
  • Use penetration pricing if you will have fewer benefits (or more negatives) than most of your competitors.
• Skimming or Prestige Pricing
  • Use skimming pricing if your new product is very different from your competitors and offers benefits none of the others offer.
  • Use skimming pricing if you have large R&D costs to recoup and your new product is different enough that consumers will pay a premium for it.
  • Use prestige (permanently higher) pricing ...