Is it really better to price your product or service at $59.99 vs $60.00? I’m pretty obsessed with the idea of pricing and the psychology at play. In fact, there is a science that applies to pricing.
When it comes to pricing, many startups price their products too low. In any business there will be a range of opinions about pricing. Unfortunately, that’s often all there is.
As a small business, you have to consider the concept of microeconomics when pricing your product or service to maximize revenue. By definition, microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources (i.e., money). Contrast microeconomics with macroeconomics. Macroeconomics considers the the sum of all economic activity such as dealing with the [...]
As I write this post, I have just returned from a motorcycle rally in the Black Hills of South Dakota. This rally is often referred to as just “Sturgis.” As always, the trip was full of lessons for entrepreneurs. Now, you may be surprised by that, but stick with me and you'll discover these lessons too. When I mention Sturgis to [...]
Do you offer your customers a convenient way to purchase from you? Is it possible to have them pay in little chunks rather than one big chunk? For example, 12 easy payments of $12 each ($144) sound a whole lot more affordable than one large payment of $130. This perception remains even though it is more cost effective to pay [...]
Once your customer pops out the end of your sales funnel and agrees to make the purchase, it is not the time to relax or celebrate the victory– It is time to up-sell. Up-sales can be broken into three categories: cross sales, add-on sales, and bundle sales.
Cross Sales: These sales are when [...]
When you have a new product or service, your customers will likely never take the risk of purchasing it unless you offer them a free sample first. Sometimes the free sample may come in the form of a gift from another person. I never considered getting a massage until I received one as a gift. I always [...]
When you have a free product or service with high amounts of traffic, platform advertisers become interested in subsidizing your free product or service by paying you a fee to share their advertisements. Free products generate high platform traffic and increase the attractiveness of your platform to advertisers. Freemium users get basic functionality for free. However, a few paying people who [...]
Pricing mechanisms come in two principal forms: fixed and dynamic. Fixed pricing has predefined prices based on a static set of variables while dynamic pricing changes prices based on market conditions. Price mechanisms can affect both your revenue stream as well as your costs. When it comes to defining a business's pricing mechanism, I find it helpful to consider a [...]
Turning a hobby or a craft into a business often has a fatal flaw with scalability. Say you have a business that produces 100 units that you plan sell for $25 and it costs you $20 to produce it. As a small scale business, you are happy with a $5 profit on each piece since you produce, pack, and ship [...]