27 November, 2013

1-3-4 sales: Methods of pricing

-         They are 4 main ways
-         Many businesses use a combination of 2 or more methods in determining the price for their offerings
-         Many businesses also present more than one offer using different forms of pricing
-         This is not exact science. Feel free to modify, adjust or come up with a combination or something new :)

1-    Replacement cost:
-         how much would I pay to build the same thing again + some cash for my time and effort

2-    Market pricing: [the most common one]
-         You compare with the prices of similar value forms + make some adjustments

3-    DCF (the Discounted Cash Flow): [not very common, used mainly to evaluate entire businesses]
-         You calculate how much you could get if you rent the business over a certain period of time – the expenses. Then you make a certain discount to represent the present value of these futuristic amounts of money

4-    Value comparison method: [my favorite, not so popular one]
-         Search for particular characteristics that are more valuable to some people than anything else, and you charge higher price for that
-         In this particular method of pricing time, cost and effort don’t count. You charge much higher than this. The only thing that matters is the value of this product to the buyer

For example; think of a program that someone made in the basement and it took him a week to do that, and then the company who want to buy it will make 10 million dollars thanks to this software. That programmer can ask for a million dollar though it didn't take him nothing to do it   

Another examples: celebrities clothes and houses and shit, they cost people incredible amounts of money to own. The actual value here is how valuable they are to the buyers

So, one of the best strategies is to find the add-value that make you stand out and how that would be a great value to the customers

Put any price you want for your value form using any method. The important thing is to be able to explain why and how you figure out that price