Most businesses manage costs, sales and productivity but too few manage pricing with enough care, says accountant and business advisor Andy Hill.
Andy, a director with OBC The Accountants, says research has shown that people like to have price options because it gives them more control over what they are paying so pricing is too important to ignore.
When university professors carried out tests by giving people price choices for a glass of beer, they found that revenue increased by 8% when they were offered three prices rather than two.
He said: “Offering price options makes sense because different people pay different prices. You improve your odds of success by offering options. Research carried out shows that offering three tier pricing works and increases sales and profits.
“When you start off, it may take a while to get your pricing absolutely right but it’s only when you start testing customer response to different pricing options that you will discover which options deliver the best profits for you and your business.”
Key steps to master the science of pricing are:
Stop offering one price and taking a sense of control away from your buyers, by giving a three tier pricing option, they feel in control and are more likely to buy from you
Collect three tier pricing examples and build a tiered pricing offer for your business
Test and measure it with real-life buyers
Keep testing and make price testing something your business does regularly.
If you would like more information on how to manage the science of pricing, visit www.businessbitesize.com/ or telephone 01323 720555.