Welcome To Startup Students

When pricing your product or service, you should put some thought into the strategy you utilize. Are you going to undercut your competitors? Would you rather target the upper echelon? Maybe you just want to price with the market. It really depends on what you are offering, but here are some different strategies you could employ.

• Penetration Pricing
  • This is when you want to quickly get some traction in your market by offering a lower (and sometime insanely lower) price. Benefits would obviously be the quick market penetration. But be careful, you dont want to undercut yourself out of business!
• Skimming Strategy
  • This is somewhat opposite of penetration pricing. Do you have a relatively new technology that nobody else is offering? Why not “skim” off the customers who are willing to pay more in the beginning. Once demand from the early adopters falls, you can then lower your prices.
• Follow The Leader
  • Sometimes it makes since to just follow the crowd and price your product competitively. Obvious products here would include commodities.
• Variable Pricing
  • Do you sell cars or real estate? Do you own an eBay business? If so, you are already using this strategy. Variable pricing involves negotiation and bargaining between your sales staff and the customer
• Flexible Pricing
  • This works well for service based companies. Do you have government clientel? Then add a couple zeros to the price tag. Have a scaled down solution for commercial use? Drop the price and gaing some market traction.
• Price Lining
  • If you’ve ever been to the Dollar General you are familiar with this strategy. All the products are offered at the same price. Obviously, this method is easy to manage, but you might get stuck due to its lack of flexibility. Times might get tough in times of inflation or an unstable market.

Hopefully this will help you grasp the basic ideas and maybe even assist you in finding the right strategy for your small business. Class dismissed.