Small Business Promotional Pricing

Small Business Discount Pricing

Promotional PricingHow small business promotional pricing is used in B2B selling is applied differently and for different reasons than moving product inventory as in B2C selling. A lot of discount pricing is used in B2C selling and where physical products are being sold from inventory. Price discounting is also appropriate for selling B2B and services too. Below are many of the common promotional pricing methods.

Free: Free services is becoming the hottest method of promotion of those selling on the Web. Customer skepticism has become such a given that the practice of giving away products or services for free has become common place. This approach could be considered akin to the old B2C trial size promotional marketing approach. The idea is to lower customer purchase uncertainty by giving something away of real value and then up-selling the customer because you gained their trust.

  • Buy One Get One Free: There are many examples of discount pricing including approaches such as Buy One Get One Free or a slight twist on this theme, buy one item and get another item of equal or lesser value free.

  • Loss Leader Pricing: The purpose of loss leader pricing is to entice new buyers. The approach is to offer select products/services at or below cost, with the expectation that these same buyers will purchase other higher profit products/services on the same purchasing trip.

  • Close out Pricing: This pricing method is to offer excess or obsolete inventory at a substantial discount. The goal is to recoup some cash before storage or disposal costs place you in negative cash flow position.

  • Membership or Trade Pricing: By segmenting customers in various groups the strategy is to offer profitable customer segments by rewarding them with special prices. This is usually offered as a loyalty or frequenting buying program where these specific customers receive lower prices on certain items, a flat percentage discount, or free rewards.

  • Quantity or Bundle Pricing: This strategy encourages people to purchase a large quantity or more total items by offering discounts for quantity or bundling their purchases. You can effectively bundle discontinued, phase-outs or overstocks with good sellers to avoid distress or liquidation pricing. You can also employ this technique with trying to establish new product/services by bundling a new product you're are trying to promote with good selling items to build overall sales or to increase brand identity for your new product/service.

  • Geographical Pricing: Geographical pricing is sometimes used where there are circumstances that necessitate pricing products/services differently around the world. This could be due to any number of factors like shipping costs, cultural influences, and scarcity in one locale verses another.

Small Business New Product/Service Pricing Methods

For new products, the pricing objective often is either to maximize profit margin or to maximize the quantity (market share). To meet these objectives, skim pricing and penetration pricing strategies often are typically employed during the initial introduction of the product/service for a limited period of time.

  • Price Skimming: This is an excellent strategy for launching new products/services. The new product/service pricing is set at a high profit margin initially since the customer is not familiar with the price that should be paid for this new product/service. The strategy is to recoup R&D and other marketing launch costs prior to the entry of competitor alternatives into the marketplace. Eventually, the new product/service will be priced according to its real value as determined by the marketplace.

  • Penetration Pricing: In order to gain market share quickly, the price charged for a product/service is set at a deliberately low price.

  • Versioning Pricing: This is now a classic up-sell approach to pricing used widely on the Internet for selling information products. Versioning is an often used pricing strategy for information, services or software. It is most appropriate selling the same base product/service in multiple editions or "versions". An introductory or basic edition is promoted at low or no cost. Then the customer is then encouraged to purchase an upgraded version with more services or value at higher prices.

  • Captive Product Pricing: Often referred to as razor/razor blade pricing, the technique is to give away an item and bundle it with another item in the system. In this strategy, you need two items that are required to work together in order to provide a customer benefit. In the razor/razor blade example, a razor is offered at for a low or free price to entice the customer to purchase the razor. Once purchased, the razor blades that will only fit that razor, are then sold at a high profit margin.

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