BeTheBusiness Mentoring Selecting the right pricing strategy

 BeTheBusiness Mentoring Selecting the right pricing strategy

Selecting the right pricing strategy can greatly influence your start-up's growth trajectory and profitability. If you're a fledgling business of 1 to 4 people, understanding these pricing models and charging mechanisms can be a game-changer. Let's dive deep and shed light on some of the most common pricing strategies, tailored for both products and services.

FOR PRODUCTS:

UNIT PRICE:
DESCRIPTION: This is the most straightforward pricing model where each product unit has a set price.
EXAMPLE: A coffee mug priced at $10 per mug.
PROS: Simple for customers to understand. Streamlines inventory management and sales projections.
CONS: Less flexibility in adjusting for bulk purchases or varying customer needs.

50% UP-FRONT, 50% ON DELIVERY:
DESCRIPTION: The customer pays half the cost initially and the remaining half upon receiving the product.
EXAMPLE: Custom-made furniture where a deposit is taken to start the work, and the rest is collected upon delivery.
PROS: Mitigates financial risk and ensures some cash flow.
CONS: Might deter customers who prefer not to pay anything upfront.

HIRE PURCHASE:
DESCRIPTION: Customers pay for products in installments over a period, often with interest.
EXAMPLE: Buying a high-end camera and paying for it over 12 months.
PROS: Makes expensive products accessible to a larger audience.
CONS: Risk of customers defaulting on payments. Administrative complexity.

FREEMIUM (WITH PREMIUM OPTIONS):
DESCRIPTION: Offer basic product features for free with the option to upgrade to a premium version that offers more features or benefits.
EXAMPLE: A mobile game that's free to play but offers in-app purchases for advanced features or cosmetics.
PROS: Attracts a large user base, potential for upselling.
CONS: Only a small percentage might convert to paying customers.

FOR SERVICES:

RETAINER:
DESCRIPTION: A fixed fee paid regularly (e.g., monthly) for agreed-upon services.
EXAMPLE: A PR firm retained for media relations services.
PROS: Steady cash flow and a committed client relationship.
CONS: Potential limitations on the number of hours or scope of work.

TIME AND MATERIALS:
DESCRIPTION: Charging based on the actual time spent and the materials used.
EXAMPLE: A renovation contractor billing for hours worked plus the cost of materials.
PROS: Fair compensation for exact work done.
CONS: Less predictability for clients in terms of total cost.

FIXED PRICE:
DESCRIPTION: A set price for a defined scope of work, regardless of time or materials used.
EXAMPLE: A web designer charging $500 to build a standard website.
PROS: Clear expectations for both parties.
CONS: Risk of underestimating the time or resources required.

PREFERENTIAL RATE (FOR CONTRACT PERIOD):
DESCRIPTION: Offer a reduced rate for clients who commit to a longer-term contract.
EXAMPLE: A digital marketing agency offering a 10% discount for a 12-month contract.
PROS: Longer-term client commitment, better revenue prediction.
CONS: Locked into a potentially lower rate.

PRE-PURCHASED HOURS:
DESCRIPTION: Clients buy a block of hours upfront, often at a discount.
EXAMPLE: A consulting firm offering a package of 20 hours at a reduced hourly rate.
PROS: Upfront payment and flexibility in service delivery.
CONS: Pressure to deliver within the purchased hours.

IN CONCLUSION:

Your pricing model is more than just a way to charge customers—it's an extension of your brand, a reflection of your value proposition, and a determinant of your business's sustainability. Whether selling a product or offering a service, carefully consider your costs, competitors, and target audience when selecting a pricing strategy. The goal is a win-win: Value for your customers and profitability for your business.

If you are interested the BeTheBusiness Mentor programme get in touch

Choose the right programme for you

12-month
Focus on the long-term growth and development
Aim to meet every 4-6 weeks
Develop your aims, goals, purpose or strategy and build your skills working with an experienced mentor over an extended period
Work together to adopt your plans and meet new challenges across 12 months

12-week
Focus on shorter-term goals and challenges
Aim to meet once a week
Use your mentor as a sounding board for key decisions and immediate priorities

Make the most of a rapid intervention to help you quickly benefit from advice and an external perspective

Tim HJ Rogers
BeTheBusiness Mentor
HTTP://www.timhjrogers.com/bethebusiness/
MBA Management Consultant + Change Practitioner
PRINCE2 Agile-Scrum Projects, Programmes and PMO
ICF Trained Coach, IoD Business Mentor, Mediator
Tim@AdaptConsultingCompany.com
Mob 447797762051

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