MAKING SURE THE
PRICE IS RIGHT
Fixed &
Variable
costs
KNOWING YOUR COSTS
Anything that changes based on the unit sold
¡ Commission per unit
¡ Direct material per unit
¡ Shipping per unit
¡ Su...
Things that stay the same regardless of volume
¡ Communications
¡ Tax
¡ Licenses
¡ Administrative staff
¡ Rent
¡ Uti...
Number of units that need to be sold for total
revenue to equal total costs (fixed and variable)
Break-even point =
Fixed ...
BREAK-EVEN: GRAPH
0
2000
4000
6000
8000
10000
12000
14000
Costand/orReturn($Thousands)
Variable Costs
Fixed Costs
Total Co...
In a month, company sells 1,200 widgets for
$10 each. Fixed costs total $5,000, with a cost
of $5 per widget.
Break-even p...
If you aren’t happy with your profit:
¡ Increase sales
¡ Lower costs
§ Fewer employers
§ Less rent
¡ Raise your price...
Basics of
pricing
strategy
HOW DO YOU
CHARGE MORE?
¡ Who is buying your product?
¡ Who are your competitors
¡ How, or will, negotiations occur?
¡ What do customers think...
Objective
Strategy
Model
$
PRICING PYRAMID
What does
your price
need to
accomplish?
PRICING OBJECTIVES
¡ Maximize Profits
¡ Maximize Revenue
¡ Maximize Market Share
¡ Reinforce brand perception
¡ Stabilize the market
¡ ...
How are you
going to
accomplish
the goal?
PRICING STRATEGY
¡ Cost Plus
§ Based on understanding measurable costs, plus profit
¡ Competition-based
§ What your competitors are doi...
PRICE/QUALITY DIFFERENTIATION
Economy Penetration
Skimming Premium
Low High
High
Low
PRICE
Quality/Differentiation
¡ Market maturity
§ Younger market = more flexibility
§ Mature markets = more pressure, limited flexibility
¡ Product ...
¡ Value
§ Price = what buyer pays
§ Value = what buyer receives
§ Set by image, word-of-mouth
¡ Quality/Perception
§...
How is
it sold?PRICING MODEL
¡ Per unit
¡ Per user
¡ Per usage
¡ Per unit of infrastructure
¡ Subscriptions
COMMON PRICING MODELS
What feels
right?ART OF PRICING
¡ No 100% correct answer
¡ Difficult to optimize for all segments
¡ Find the equilibrium
§ Don’t leave money on the ta...
Factors to
keep in mindNOW WHAT?
¡ Keep an eye on the competition
§ Pricing should align with positioning
and functional differences
¡ Educate your sale...
It’s time for
questions.ASK AWAY
of 25

Pricing Your Services

From knowing your costs to the basics of a pricing strategy, this presentation is guaranteed to give you a lot to think about.
Published on: Mar 4, 2016
Published in: Business      
Source: www.slideshare.net


Transcripts - Pricing Your Services

  • 1. MAKING SURE THE PRICE IS RIGHT
  • 2. Fixed & Variable costs KNOWING YOUR COSTS
  • 3. Anything that changes based on the unit sold ¡ Commission per unit ¡ Direct material per unit ¡ Shipping per unit ¡ Supplies per unit VARIABLE COSTS
  • 4. Things that stay the same regardless of volume ¡ Communications ¡ Tax ¡ Licenses ¡ Administrative staff ¡ Rent ¡ Utilities FIXED COSTS (OVERHEAD)
  • 5. Number of units that need to be sold for total revenue to equal total costs (fixed and variable) Break-even point = Fixed costs / (unit selling price-variable costs) BREAK-EVEN
  • 6. BREAK-EVEN: GRAPH 0 2000 4000 6000 8000 10000 12000 14000 Costand/orReturn($Thousands) Variable Costs Fixed Costs Total Cost Income Break-even point
  • 7. In a month, company sells 1,200 widgets for $10 each. Fixed costs total $5,000, with a cost of $5 per widget. Break-even point = $5,000 / ($10-$5) = 1,000 At 1,000 widgets, the company covers costs. Additional 200 widgets is profit. BREAK-EVEN: EXAMPLE
  • 8. If you aren’t happy with your profit: ¡ Increase sales ¡ Lower costs § Fewer employers § Less rent ¡ Raise your price BUT I WANT MORE…
  • 9. Basics of pricing strategy HOW DO YOU CHARGE MORE?
  • 10. ¡ Who is buying your product? ¡ Who are your competitors ¡ How, or will, negotiations occur? ¡ What do customers think of your product? § Capabilities § Quality WHAT YOU NEED TO KNOW
  • 11. Objective Strategy Model $ PRICING PYRAMID
  • 12. What does your price need to accomplish? PRICING OBJECTIVES
  • 13. ¡ Maximize Profits ¡ Maximize Revenue ¡ Maximize Market Share ¡ Reinforce brand perception ¡ Stabilize the market ¡ Achieve return-on-investment ¡ Become the price leader ¡ Create product interest ¡ Discourage entry of new competitors WHAT SHOULD YOUR PRICING DO?
  • 14. How are you going to accomplish the goal? PRICING STRATEGY
  • 15. ¡ Cost Plus § Based on understanding measurable costs, plus profit ¡ Competition-based § What your competitors are doing ¡ Value-based § Price in relation to what product delivers § Hardest to quantify § Requires ongoing work HOW DO YOU REACH YOUR OBJECTIVE?
  • 16. PRICE/QUALITY DIFFERENTIATION Economy Penetration Skimming Premium Low High High Low PRICE Quality/Differentiation
  • 17. ¡ Market maturity § Younger market = more flexibility § Mature markets = more pressure, limited flexibility ¡ Product category § Highly innovative products have limited barriers ¡ Demand § High demand = higher pricing § Lower demand = lower price ¡ Competition § Don’t be highest or lowest FACTORS IN PRICING (1 OF 2)
  • 18. ¡ Value § Price = what buyer pays § Value = what buyer receives § Set by image, word-of-mouth ¡ Quality/Perception § Higher prices tend to signal higher quality § Customer ultimately decides ¡ Differentiation § Highly differentiated products = less price sensitive ¡ Brand Premium § High brand equity = higher prices FACTORS IN PRICING (2 OF 2)
  • 19. How is it sold?PRICING MODEL
  • 20. ¡ Per unit ¡ Per user ¡ Per usage ¡ Per unit of infrastructure ¡ Subscriptions COMMON PRICING MODELS
  • 21. What feels right?ART OF PRICING
  • 22. ¡ No 100% correct answer ¡ Difficult to optimize for all segments ¡ Find the equilibrium § Don’t leave money on the table § Don’t lose deals to competitors FINDING BALANCE
  • 23. Factors to keep in mindNOW WHAT?
  • 24. ¡ Keep an eye on the competition § Pricing should align with positioning and functional differences ¡ Educate your sales team § Make sure they understand the differences and how they factor into pricing ¡ Make sure your market “gets it” § It needs to be easy to explain and understand ¡ Review regularly, adjust as needed YOU SET YOUR PRICE. NOW WHAT?
  • 25. It’s time for questions.ASK AWAY

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