In a competitive market environment business owners are prone to sell themselves short, because they do not take the time to determine a fair and justifiable price for their services and products. Below are some pricing strategies you can use to determine the worth or price of your product or service.
1. Value drivers
There are so-called "value drivers" that support the charging of a premium for your service or product, if:
- It solves an expensive problem for the client
- It saves the client money
- It increases the client's turnover/profit
- The demand for your service/product is high and there are only a few providers
- You have a good track record with regard to delivery
- You provide good warranties
2. Pricing alternatives
You can also consider the following pricing alternatives:
- per hour
- per project
- per unit
- per solution
- per result
- a "freemium" model – provide a basic solution for free, but charge a premium for greater functionality
- based on volume (use a sliding scale for a volume discount)
3. Additional factors
The following factors can also influence your pricing strategy:
- the price and value offering of your competitors
- the market trends within your industry
- the value your product/service has for a client
- the difficulty of the work that must be done
- the resources necessary to complete the work
the expected time frame within which the work must be completed
“Pricing is actually a pretty simple and straightforward thing. Customers will not pay literally a penny more than the true value of the product.” – Ron Johnson (American Businessman).
The content in this article was provided by Jannie Rossouw, Head: Sanlam Business Market.
Sanlam is a diversified financial services group, headquartered in South Africa, operating across a number of selected global markets.
We have been creating value for stakeholders since 1918 – for more than 100 years. Sanlam is one of the biggest internationally active insurance groups globally, and is classified as a domestic systemically important financial institution in South Africa. We contribute to financial resilience and prosperity in all the markets where we are present.
Sanlam is committed to building a culture of client-centricity, where our Wealthsmiths™ support people in living their best possible lives through financial resilience and prosperity. Our strategy has remained largely unchanged since 2003, and our strategic intent of sustainable value creation for all key stakeholders remains firmly in place.
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