1 / 10

Strategic Pricing: Maximizing Profit and Customer Retention

Learn the benefits and challenges of raising prices strategically to boost profits, expand operations, and maintain customer loyalty. Discover the correct way to set prices based on costs, competitors, and customer value.

nona
Download Presentation

Strategic Pricing: Maximizing Profit and Customer Retention

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Is It Time To Raise Prices By:Josh MillerAdam Opoien

  2. Results of a Price Raise • Good: • Larger profit • Hire more employees • Buy new Equipment • Work Less (owner) • Bad: • Alienate longtime customers • Close the store

  3. How Prices are currently set • Entrepreneurs respond: • “we go by our gut” • Result: Price is low • Cost + (%) margin of profit • Which is great! However, if you set 20% but could make 40% you LOSE! • Competitors price – (%) = Price • Good: if product is identical • Bad: if competitors do not know how to price correctly

  4. Correct way to price • Smart Pricing consist: • Costs • Competitors • Customers • Sales people • The Value of a product or service • How much would a rational consumer be willing to pay for your product

  5. Value • Objective • The most that you could rationally charge for a product • Perceived • What person is willing to spend • Gap between value of product and perceived value

  6. Willing to Pay • Calculator Study • Travel 20 minutes to save $5 • Jacket Study • $125 • People are irrational in purchase decisions

  7. Setting Prices • Reference price • Shop your competitors • Cenedella’s price • $50/month to $25/month • Far from satisfied • Sam Calagione, President of Dogfish Head Craft Brewery • Uses fine wine as reference price • Purposely doesn’t meet demand to create demand • Aligned prices with objective value

  8. Selling Your Price • Fire Eye raised prices by 25% • Sold the increase to his clients • HenkKeukenkamp, CEO of Scope • Product similar to Microsoft • Customers urged him to raise prices • Started at $795 per user per year now at $2,295

  9. Back Door Price Hike’s • Eliminating discounts • Eliminating 2% discount within 30 day payment is easier than raising prices 2% • Start charging add on services that are free • Reduce amount of product but keep price • Dogfish Head sells 4 pack instead of 6 pack

  10. Questions • How do you guys perceive value in products? • Use reference prices? • How much farther are you willing to travel for a product that’s cheaper? • If you were a business would you tell your supplier to rise their prices?

More Related