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Pricing Strategies for Products and Services

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40hz:
Probably the hardest part of going into business and/or running a business is setting prices for your products and services.

And although price setting is still more of an art than a science, there are some "best practices" and strategies that can help you get as close to the optimal yield as possible. Tracking them down, and vetting them, can take time however.

Fortunately, Six Revisions recently posted an article by Ruben Gamez that summarizes seven very good and workable strategies you can begin thinking about and implementing immediately. And while the article is primarily directed at the sales of services, most of it applies equally well to products. I'd even go so far as to say that some of the strategies discussed could be effectively applied to salary negotiations if you're not in business for yourself.

Worth a read!

7 Pricing Strategies Based on Research Studies
Nov 19 2012 by Ruben Gamez


For any freelancer, how much to charge clients is one of the hardest things to get right. If you set the price for your services too low, you could be leaving a lot of money on the table and get stuck working with clients that don’t see the true value of your work.

When it comes to pricing, most of us are either guessing or copying what others are doing.

Luckily, we can rely on some research studies to help us price our services better by applying the psychological principles derived from the studies that we’ll discuss below.

Here are seven pricing tips based on research studies...
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Read the full article here.

Happy pricing! :Thmbsup:

 8)

TaoPhoenix:
Hmm.

I've been on the buying side a few times for my commissioned widgets. Because they are designed for personal use and anyone else liking them is just gravy, I've come up with a few principles of my own.

1. I specialize in low risk widgets, just to get some stuff done. As soon as an idea begins to slide out of the range of the coding snacks here, I start thinking about commissioning stuff. As a strange take on the "Outsourcing is Evil" dept, yeah, upon threat of being stoned, I'll admit I look on oDesk which has a lot of low-fee workers.

2. Since it's just me, I can let certain bugs slide for a while and think about touching them up later. It's shades of that "worse-is-better" article posted elsewhere. I-As-Client need time to thrash out features I had no idea would matter. My PDF batch saver is a funny example. It's supposed to be so insanely simple, that's why I asked it as a snack. But since that didn't pan out, I began commissioning it as a mini-app. It turned out that I need some slightly clever file-naming heuristics which I had sorta gotten wrong in my initial spec.

3. So if I-As-Client think my spec is going to move around a little, sometimes it's interesting to do the thrashing with a less skilled contractor with a lower rate per hour, so that what is basically R&D-ish stuff doesn't break the bank. Then I sometimes traded it off to a higher end worker with a mostly defined proof of concept and say "go polish this up." I've heard back sometimes that low grade worker code is bad, but even if the new worker has to completely rip the code in half, the value was in me saving time playing all Pointy-Headed-Boss trying to figure out WTH I needed.

Yay Pricing fun!   ;D

40hz:
@Tao - I've sat on both sides of the table too. And I must admit I always found it a lot easier to buy than it ever was for me to sell something.   ;D

TaoPhoenix:
@Tao - I've sat on both sides of the table too. And I must admit I always found it a lot easier to buy than it ever was for me to sell something.   ;D
-40hz (December 22, 2012, 09:15 AM)
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It's been tricky to buy, when I go to oDesk I am sorta ready to spend money, it then just comes down to "optimizing the hire". This last time I purposely lowballed because the app was so simple I figured it didn't need a whole lot of firepower thrown at it, aka "almost anyone" could do it, so it was better to save $600 even if I had to burn a few extra hours bug checking use cases that a senior A+ dev might have thought of.

But until I ran out of funds, I do keep an eye on the complexity vs proposed ability of who I hired and I had a better dev last time.

Paul Keith:
I can't say I have enough experience (in fact I'm extremely extremely inexperienced on this subject) but the list is incomplete at best and at worst it's cute but it's wrong.

I don't know where exactly I got the notes for this but I believe I started with this link but I really don't know who was it that said it:

http://hbr.org/2012/07/the-end-of-solution-sales/ar/1

The notes I have, had this written:

We seem to be trying to fix highly complex problems at the same level at which they were created.

In established procurement lines, where the level of knowledge transfer is low, Transactional salespeople with thrive.
    
In established procurement environments where knowledge transfer is low but integration complex, Solution salespeople will thrive.
    
In environments where the level of knowledge transfer is high, but the solution not integrated, Advisory salespeople will thrive.
    
In environments where knowledge transfer is high and the problem not clear (let alone the solution) Insight/Challenger salespeople will thrive.
--- End quote ---

At the level they were created is the key I think.

Pricing is bonkers because the customer started with some sort of minimum median line for your work. Over time this became an industry to itself with no consideration for long term i.e. if you pay for a service provider you liked/trusted with higher than normal prices then the chance of them being able to better improve their services increases compared to if you both agree on just getting the job.

As far as customers, you can't really expect them to care for this. Not all of them is looking out for you.

As a price strategizing advice though, I can't provide a better alternative advice but if you're going to do lies like this:

For example, instead of offering a generic "website redesign" service, customize the service to the the customer’s needs (e.g., "a website redesign to increase online leads.") That one small change will make sure that your solution is incomparable and will make it harder for customers to reference the low price anchor.
--- End quote ---

Aren't you and the customer better off for providing actual optimized "cult feel" good types of values than throwing out white lies in order to nab a client similar but obviously not up to scale of Apple?

One is morally distasteful but at least you're providing some key unintentional attributes to your client in the form of either transaction security, insight to what they don't realize, challenges and education to their old way of thinking, advises... these are big fluffy words too but at least it shifts things away from silly crap marketing urban myths of:

Be the Starbucks, not the Dunkin’ Donuts.

If everyone can get away by being a Starbucks, wouldn't you think everyone would build Starbucks?

But if you want to provide the same solutions as Starbucks, you (the provider) have to change your product not just your brand or the perception of: your brand from the outside. It's not always price=food or price=jobs or price=business. There's price=strategy. That word that denotes that even if the word small did something to your sign, there's still the person inside or the service out there or the menu and toolbars for crying out loud even website designs don't just change the webpage title and make the skin look like Starbucks' as the basis of their pricing strategy even if that could help sell them to their clients!

I guess this topic just holds a special hate for me. When Starbucks penetrated the vain office workers demo of our country, it could have lead to better services but instead the copycats and the fans followed the same product template but none of the same pricing strategies so when Starbucks stopped innovating , so did most places and we just end up with a bunch of places now having free wi-fi. Worse, the lies. The lies of why to sell to these cash spending people and the how. It...worsened the already worse view of treating and selling to people as if they were idiots and pawns.

It just creates an industry of the wrong set of contexts that get to be the right set of contexts because of the monopolizing effect of industry expectations which are good for the insular pricing strategy "of those in the know" but horrible for actual pricing strategies or elevating both customers and service providers to the next level of price and value. It also changes the wrong way to be outliers and leads to more corporate style firm mindset in situations that shouldn't have and can't excel with the same tricks used by corporations.

P.S. I've also been reading a forum topic on how hard it is for novelists/scriptwriters because of how Hollywood works and reading this just made me lose it.

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