Pricing strategies for small businesses are important to your success and longevity in business. There are 3 best pricing strategies for small businesses to choose from when you’re setting your business strategy. There’s economic pricing, dynamic pricing, and premium pricing. We’ll cover each of these in this article and give real life business examples of these pricing strategies for small businesses.
Today in 5 minutes or less…
- 3 Common Pricing Strategies
- How to pick the best one for your business
- How to successfully implement it
3 Best Pricing Strategies for Small Businesses
Economic Pricing Strategies for Small Businesses
The economic pricing strategy is all about aiming for maximum sales volume by offering the lowest-cost option in the market.
Now, here’s the scoop: while the profit margins may not be sky-high with this approach, the goal is to make up for it with sheer sales volume and snagging a big slice of the market pie.
This strategy works best for businesses with minimal overhead and access to cost-effective supplies. Plus, you’ll need a solid, growing team to keep up with the high production volume this approach demands.
So, if you’re looking to dive into economic pricing, make sure your ducks are in a row, and your team is ready to hustle! This is the first pricing strategy for small businesses that most start with until you get really good at your craft.
Dynamic Pricing Strategies for Small Businesses
Dynamic pricing out of the strategies for small businesses is one that is flexible and adjusts to the current demand.
The goal is to increase revenue, create production movement, and get the best price you can get at that moment in time.
By adjusting prices on demand fluctuations you can strike the perfect balance between sales volume and revenue growth.
Premium Pricing Strategies for Small Businesses
Premium pricing strategies for small businesses are when you increase the perceived value of the product or service by offering it at a premium price.
This strategy hinges on positioning your offering as high-quality, luxurious, and exclusive thereby justifying a premium price tag.
When you get this right your offering is enhanced and the profit margin is hefty.
Pick the best strategy for your business
Pricing Strategies for Small Businesses Case study 1
The Lemon Yard is a used car lot. They employ the economic pricing strategy.
The goal of the owner is to move cars as fast as possible. They aim for high sales volume because used cars are abundant and they can keep new ones flowing in as quickly as they can sell them.
This works well because the salesmen are paid commission and they also want to sell as many rigs as possible as fast as possible because it means they also make more money.
Pricing Strategies for Small Businesses Case study 2
Revive Remodels uses the dynamic pricing strategy.
The goal of the owner is to make as much profit as possible and to not have a lag time on production of more than 6 weeks.
In the spring pricing is lower because they want the schedule to be as full as possible so they can get their team to work as early as possible in the year.
When the schedule is booked out 6 weeks or more prices increase. This slows down the number of jobs hitting the schedule and makes the profit of the jobs that do get scheduled much loftier.
This works well because there is a production limit that the team can achieve. It’s not a quick process to add crews because labor is tight and it takes time to get them fully operational.
If a new crew is hired and once they are up and running at full capacity then the prices will be decreased again. This allows for the schedule to fill up fast so the new crew has work.
This balancing act is continued throughout the year. Year after year.
Pricing Strategies for Small Businesses Case study 3
Premier Painting Group finds that a premium pricing strategy works best for them.
The owner invested in top of the line equipment and has a specialized technique that not every painting company can pull off. Their trucks are shiny, their painters are clean cut, and their office is warm and welcoming for people to come in and see samples of work.
The owner’s goal is to position PPG as the elite painting group who services high end clients and goes above and beyond to make sure each job is perfect. Their clients consist of celebrities, business people, and the ultra wealthy in their community.
This works because they keep their team small and highly specialized in their skill. They offer services that are above and beyond competitors, and they are highly sought after by anyone who earns more than $500,000 per year.
They do the same amount of work as the next guy but their profits are much heavier because they offer a premium service that customers are happy to pay a premium price for.
In Conclusion
Choosing the right pricing strategy for your business can mean the difference between success and failure in business.
There are 3 best types to choose from: economic, dynamic and premium pricing strategies for small businesses.
Once you pick one you don’t have to keep it forever. You can adjust your pricing strategy as your business strategy changes and you grow and evolve. One of the biggest benefits to having the right pricing strategy in place in seeing the boost in your profit margin. When this is done right you’ll see the difference in your bank roll.
Successfully Implement Your Pricing Strategy
- Do your research- find out what your competitors are charging.
- Set your prices.
- Set the % increase or decrease for dynamic pricing.
- Monitor your results.
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